CHICAGO - Illinois began to feel the financial fallout of Gov. Rod Blagojevich's corruption scandal after Standard & Poor's cited it in its decision to put the state's credit on negative CreditWatch and finance officials delayed a $1.4 billion cash-flow issue yesterday as they awaited final approval of the transaction documents from some state officials.

"The CreditWatch placement reflects our opinion of the state's growing budgetary shortfall, now projected at $2 billion for the current fiscal year, and our concern that the legal charges now facing the governor and his chief of staff may challenge the state to respond to this fiscal situation on a timely basis," Standard & Poor's analyst John Kenward wrote in a report issued late Wednesday on the state's AA credit.

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