SPRINGFIELD – State officials say they are disappointed about an investor service’s decision to again lower Illinois’ credit rating.
State Treasurer Michael Frerichs on Thursday released a statement after Moody’s Investor Service decided to lower Illinois’ credit rating for the second time since the budget impasse.
“This credit downgrade is disappointing because it is avoidable,” said Frerichs. “Illinois remains a good investment, but the focus on non-budgetary items is driving up the cost of government. Higher interest rates when we borrow money mean fewer dollars for teachers, child care workers, and others who serve our most vulnerable.
Bonds are a tool the state uses to borrow money. The Treasurer’s Office receives and invests the proceeds of the bond sale. The lower a state’s credit rating, the higher the interest rate on the loan. Interest payments will easily exceed current investment yields.
“I continue to urge Governor Rauner and the Illinois General Assembly to put their differences aside and get a budget in place before more people are hurt,” Frerichs’ statement said.
Illinois’ General Obligation debt remains a sound investment because the state’s constitution ensures that bond holders will be repaid, he said. However, repeated downgrades weigh heavily on how individuals and investors perceive Illinois’ economic and political climate. Negative perceptions never are beneficial nor productive, he said.
Rauner’s office released this statement through his press secretary, Catherine Kelly:
“When the General Assembly adjourned without passing a balanced budget, the Administration warned the super majority in the legislature there would be consequences. This report underscores the need for real structural changes to repair the years of unbalanced budgets and deficit spending by the majority party on Illinois’ finances. Every rank-and-file Democrat who blindly followed the Speaker down this path is directly responsible for the downgrade.”
House Speaker Michael J. Madigan issued the following statement after Moody’s Investors Service downgraded Illinois’ credit rating:
“Governor Rauner has created the crisis he so publicly sought. The crisis he wanted when, shortly after taking office, he said ‘Crisis creates opportunity. Crisis creates leverage … and we’ve got to use that leverage of the crisis…’
“It’s an outrage that we have gone nearly a year without a state budget. This downgrade is directly attributable to Governor Rauner’s reckless decision to hold the state hostage for more than a year and to create the crisis he desired. The governor’s own proposed budgets are billions of dollars out of balance, and, for almost a month, a bipartisan plan to provide emergency funding for human services providers and our most vulnerable has languished on Governor Rauner’s desk. He refuses to sign that bill because he continues seeking a state of crisis in Illinois.
“We are committed to continuing our negotiations with the governor on his agenda, but we won’t support an agenda that benefits the wealthy and corporations at the expense of middle-class families. The governor needs to work with legislators to pass a budget that ensures we continue to fund education, health care for the frail elderly and persons with disabilities, and other basic services that Illinois families rely on, rather than refusing to allow government to function in order to continue his manufactured crisis.”
– From the Illinois Business Journal