CHICAGO – Illinois House Speaker Michael Madigan sent letters Friday to the three rating agencies that cover the state, asking them to hold off on any negative action as work continues on efforts to break two years of budget gridlock.
Release of the identical
A budget agreement on spending is still far from final and negotiations are ongoing on tax hikes. Divisions also remain to be sorted out on other policy and governance reforms demanded by Gov. Bruce Rauner but the tone in debate Friday was more civil and the vote marked clearance of a first hurdle.
After the amendment vote that Madigan had sought, applause broke out when the vote tally of 90-25 posted. Democrats hold 67 seats and Republicans hold 51.
The state must resolve its budget mess soon or it risks a downgrade to junk, S&P Global Ratings has warned. It rates Illinois BBB-minus.
Moody’s Investors Service assigns a negative outlook to the state’s Baa3 rating and Fitch Ratings expects to act on the state’s BBB rating by the end of July based on its watch placement.
“I think it’s a good step forward, a step that we can build upon. There is much work yet to be done,” Madigan said, adding that he was sending letters to the lead Illinois rating agency analysts “asking them to defer any further opinions relative to the credit rating of the state of Illinois until we’ve have sufficient time to finalize our budget-making.”
In the letters, Madigan wrote: “While we’ve made significant progress toward solving the governor’s budget crisis, more work remains. We will be continuing our progress toward passing a balanced budget. In light of this ongoing progress, I would ask that your agency temporarily withhold judgment and allow legislators time to negotiate a bipartisan, balanced budget.”
S&P, Fitch and Moody’s declined to comment on the letters.
The House will remain in session Saturday and a leaders' meeting will be held Friday for further negotiations on non-budgetary items. A deep divide between Democrats and Gov. Bruce Rauner on his demands that policy items such as worker’s compensation reforms and a local property tax freeze be included in any budget deal with tax hikes has driven the gridlock.
Madigan said he was also convening a meeting of “interested parties…in an effort to finalize the revenue bill.” House Democrats filed an amendment late Thursday to the Senate Democrats’ revenue package outlined in Senate Bill 9.
Gov. Bruce Rauner, who has not been present in leaders' meetings, said earlier in the week he would keep lawmakers in special session until a budget deal was reached.
While there are some differences on the tax side, lawmakers generally agree on plans to raise $5 billion in new annual revenue with the most significant source being a proposed increase in the personal income tax rate to 4.95% from 3.75% and in the corporate rate to 7% from 5.25%.
The GOP and Democrats differ on the revenue plan in that Democrats want to make the hike permanent and Republicans want to limit it to four years to accompany a four-year local government property tax freeze. More negotiations are also needed on how short-term borrowing to authorize to pay down a $15 billion bill backlog.
More revenue is needed to deal with the state’s dire cash flow condition. The state collects only about $33 billion a year and is spending $39 billion based on continuing appropriations and court orders.
Pressure has reached a boiling point for lawmakers amid rating agency warnings that the state could be cut to junk if the budget impasse dragged into a third fiscal year Saturday. Some school districts have warned they won’t be able to open in the fall without aid being appropriated and transportation projects are set to grind to a halt Saturday. Public universities are facing accreditation risks and social service agencies starved for state payments have shut their doors.
During House debate on the amendment Friday, lawmakers of both parties talked of the “catastrophic” fall of the state’s rating to junk that looms -- a first ever for a state -- and spoke of how the public is tired of political rants and are seeking action.
“Now is the time to bring this nightmare to an end,” said Rep. David Harris, R-Arlington Heights.
“We are close. We are so close I can taste it,” said Minority Leader Jim Durkin, R-Western Springs.
In other developments Friday, Senate Republicans chose Sen. Bill Brady, R-Bloomington, to replace Sen. Christine Radogno, R-Lemont, as minority leader. Radogno announced Thursday she was resigned her senate seat effective at the end of the day Saturday. Brady has served in the Senate since 2002 and was assistant GOP leader.
