Editorial | Illinois Bond Ratings Rise Much Better Than Fall | Editorials
A little bit helps.
A thirsty man wandering the wilderness would never turn down a pint of water for demanding a gallon.
So, in that context, why wouldn’t the people of Illinois be – or shouldn’t – be happy and somewhat relieved to have a little bit of good news regarding Illinois’ tax status?
Citing a “significant improvement in government finances,” Moody’s Investor Services recently upgraded the rating of government bonds up a notch from Baa3 to Baa2.
The common man will not know what this means. But Illinois rose through the ranks from one notch above junk bond status to two notches.
This is the first time that the Illinois bond rating has been upgraded in 20 years. Improvement comes after a constant downward spiral.
This is good news, and it should be treated as such, because the higher a government’s rating, the lower the interest rates it has to pay on the bonds it issues.
Governor JB Pritzker was so happy with the news that he broke his buttons at a press conference he held to lavish praise on himself.
“I have promised to restore fiscal stability in Illinois, and Moody’s upgrade shows Illinois finances are on the right track for the first time in two decades,” he said. said, almost certainly previewing his 2022 re-election campaign rhetoric.
The governor has clearly planned for continued improvements in the ratings. But in doing so, Pritzker’s position is akin to that of one who has severe hemorrhoid problems and vehemently argues that his problems are all behind him.
What is past is not necessarily a permanent part of the past. Illinois remains in a bunch of financial problems.
Its bond ratings are the lowest of the 50 states. While Moody’s praised the new state budget for increasing contributions to public pensions – costs are up about 25% of the state’s operating budget – it also noted that pensions are “systematically underestimated under state funding law”.
Large increases in revenue generated by the private sector have eased Illinois’ cash flow woes, as have the multiple federal bailouts authorized by Congress and President Biden. Although the economy is growing steadily, large and continuous increases in income are not guaranteed, and no one expects the national government to approve future bailouts in addition to past bailouts.
Financial analysts the governor likes to call “carnival barkers” have offered a different explanation for the rise in Illinois bond ratings.
Wirepoints’ Mark Glennon attributed the state’s improvement to the $ 138 billion in federal bailout payments described in a report prepared by the Committee for a Responsible Federal Budget.
The CRFB said the amount had been “committed or paid to recipients in the public and private sectors” and that “an additional $ 24 billion is authorized for Illinois under federal law already passed.”
Dismissing claims that state officials had anything to do with improving Illinois bond ratings, Glennon wrote that “direct aid alone, to most states, including including Illinois, exceeded any fiscal damage caused by the pandemic ”.
As is often the case, the argument boils down to who gets the credit for all the improvements to Illinois’ finances. The good news is, there is one improvement that some people are fighting over for credit.