The fiscal stability of Illinois is approaching a pivotal point in about the next 50 days, carrying potentially severe consequences for the nation’s fifth-most-populous state, Standard & Poor’s said.
The rating company said in a report yesterday that the remaining weeks of the Illinois General Assembly’s budget session should help determine the financial direction of the state, which has the lowest credit rating and unfunded pension liabilities of $100 billion. A 2011 income-tax increase is scheduled to roll back at year-end, creating a $1.8 billion shortfall in the 2015 fiscal year.
“We believe the final outcome of legislative deliberation on the budget and judicial deliberation on the pension reform will cement the state’s credit direction and could have a profound effect on its budgetary performance and liquidity,” Robin Prunty, an S&P analyst, said in the report.
Illinois Governor Pat Quinn, a Democrat running for re-election in November, presented his $29.4 billion budget proposal March 27, recommending the tax increase remain in effect. Under current law, the 5 percent rate on individuals is scheduled to decline to 3.75 percent, while the 7 percent corporate levy would drop to 5.25 percent on Dec. 31.
State lawmakers approved pension changes in December designed to save the state $145 billion over the next 30 years. A coalition of public employee unions is challenging the constitutionality of that cost-cutting bill in court. Yesterday the assembly approved a bill to allow Chicago to restore financial stability to two of its pension funds.
Illinois is scheduled to issue $250 million in general-obligation debt tomorrow to finance transportation projects.
Illinois bonds have outpaced a broad muni rally this year after the December pension deal, gaining 3.9 percent to the broader market’s 3.5 percent advance, S&P Dow Jones Indices data show.