Illinois moved another step back from the ratings brink Thursday afternoon, as Moody’s Investors Service revised the outlook to stable from negative on its Baa3 rating, which was affirmed.
The action gives Illinois a bit of space above speculative-grade status, though the rating itself remains at the lowest investment grade.
S&P Global Ratings on March 9
Moody’s cited “the state's financial performance through the pandemic, in combination with increased levels of federal support that will moderate near-term fiscal and economic pressure.”
Investors gave their
“State and local government funds expected under the latest federal aid package may help the state repay deficit financing loans, support its financially pressured local governments and spur employment, income and tax revenue growth,” Moody’s said. “While credit risks raised by the pandemic during the past year are receding, the longer-term challenges associated with the state's very large unfunded post-employment liabilities remain.”
The state expects to receive about $7.5 billion from the American Rescue Plan signed recently by President Biden. Gov. J.B. Pritzker has said he would first use proceeds to pay off the MLF borrowing and then to pay down the state's bill backlog.
The federal money is a one-time infusion of cash and Pritzker's proposed fiscal 2022 budget does little to address the state's $144 billion pension tab that weighs heavily on the rating.
Moody’s new stable outlook also applies to Build Illinois sales tax revenue bonds, which were affirmed at Baa3, and Metropolitan Pier and Exposition Authority bonds, which were affirmed at Ba1.
The state's total debt under these three programs is about $36 billion, according to Moody’s, including about $3 billion borrowed from the Federal Reserve's Municipal Liquidity Facility.
