CHICAGO – With Illinois’ public higher education schools facing downgrades and accreditation risks, Gov. Bruce Rauner and the legislature’s Democratic majority remain at loggerheads over how to free up their funding amid the ongoing budget impasse.

The Senate on Wednesday approved along party lines Senate Bill 2046, which appropriates $3.9 billion in spending. It would allow the state to pass along scheduled aid to the state’s higher education system, free up student aid payments, make local school construction grants, and cover social services costs, all of which have been held up without a budget in place.  The House signed off on the bill earlier this week.

“Our higher education and human service organizations are on the brink of collapse,” said Sen. Pat McGuire, D-Joliet, chairman of the Senate Higher Education Committee. “We have given the governor yet another opportunity to stand with Illinois’ neediest college students and most vulnerable residents.”

Rauner is expected to veto the bill when it arrives on his desk, setting the stage for an attempted override. The administration dislikes the package because it relies on $3 billion of general funds with no specific revenues streams cited to fund the payments.

Republicans have proposed their own legislative packages to fund universities and human services, but Democrats dislike some provisions of those bills.

“This is just another phony budget … now is the time for bipartisan solutions and negotiation, not phony budgets and empty promises,” Rauner’s spokeswoman Catherine Kelly said.

The state has 39 community colleges and nine public universities.

S&P put five of the state’s public four-year universities on CreditWatch last month and has sounded alarms over the impasse’s potential impact on community colleges, which have so far weathered the payment delays.

Moody’s Investors Service last month put the ratings of 19 Illinois community colleges and their $855 million of debt under review for a possible downgrade. Moody’s recently confirmed several of the ratings after a review. Moody’s also downgraded three four-year universities in February. All eight it rates carry a negative outlook.

S&P downgraded Northeastern Illinois University on Tuesday to BBB-plus from A-minus in action primarily driven by the school’s own operating struggles due to enrollment declines. It remains on CreditWatch with negative implications due to the budget impasse as its aid accounts for 45% of operating revenues.

"In our view, the 'BBB-plus' rating also reflects the university's weakened capacity to service its debt,” said analyst Ashley Ramchandani.

The CreditWatch is due to concerns that the state may fail to resolve the budget gridlock in time to make fiscal 2016 payments and that fiscal 2017 payments could also be delayed.

“We believe that given NEIU's current operating environment, the university will likely exhaust working capital and deplete operating reserves by the end of the fiscal year, which would further stress the university's liquidity and credit profile,” Ramchandani wrote.

In other recent state legislative action, a committee advanced a Democratic-sponsored overhaul of the state’s school funding formula on Wednesday. Members want additional information on how the changes would affect individual districts before the measure is called up for a full Senate vote. The proposal would provide more funding for districts like Chicago Public Schools which have a high percentage of impoverished students.

Senate President John Cullerton, D-Chicago, is proposing a shift in how the state taxes gasoline consumption to raise more funds for roads. Under the plan, drivers would pay per mile traveled through a device installed in their car, or could chose to pay a 1.5-cent-per-mile tax based on 30,000 miles per year. The proposal is aimed at offsetting the drop in gasoline taxes due to more efficient cars.

Other local and state governments – like Seattle and California – are in various stages of exploring a mileage based tax.

In the Chicago City Council, Alderman Gilbert Villegas this week proposed an ordinance that would increase the city’s gasoline tax to 12 cents a gallon from five cents. The funds would be set aside to finance city streetway improvements and other transportation related costs like bridge repairs.

Emanuel – who during his election campaign last year touted the city’s stable gasoline, sales and property taxes – said he’s hoping for state action.

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