Moody's

Susan Stephens / WNIJ

Northern Illinois University wasn't alone in the bond-rating downgrades announced Friday afternoon by Moody's Investors Service. The ratings agency also downgraded the University of Illinois, Illinois State, Northeastern, and Southern Illinois University.

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One day after the Illinois General Assembly ended its spring session without passing a budget, two bond-rating agencies have downgraded the state’s credit. The actions by S&P Global Ratings and Moody's Investors Service leave state government debt just one step above “junk” status.

S&P says Illinois is at risk of a negative credit spiral because of what it calls "unrelenting political brinkmanship." This means the agencies think there’s a real possibility state government could run out of cash and default on its debt.

Moody's Investors Service has placed six Illinois public universities on review for downgrade, impacting a total of approximately $2.2 billion of public university debt. According to a release issued by the company, the review is prompted by  "failure of the State of Illinois to enact a budget providing full operating funding to the universities for the current fiscal year 2017 and resulting operational and liquidity strains on the universities."

Illinois’ population losses are frequently cited in debates over the state’s tax rates and business laws.
Last year, Census figures show it was tied for the greatest rate of people leaving the state.

But Sarah Crane, with Moody’s Analytics, says a federal immigration crackdown could make it even worse.

"Any policies that severely curtail immigration will hurt the state's population growth even more than expected, in addition to labor force growth.”

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Moody’s Analytics says Illinois is among the Midwest’s “weakest links.”  That’s according to a report prepared for the Illinois Commission on Government Forecasting and Accountability (the legislature's nonpartisan research group). 

State economist Ed Boss acknowledges that an economic downturn could undo any progress toward a balanced budget. 

“I think even though the forecast that Moody’s gives is for some improvement next year, it’s not much," he said. "It’s still a pretty dismal picture."

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