Our View: Illinois bond ratings improving, but we have a ways to go

Moodys, Fitch Ratings upgrade the state’s credit outlook from “negative” to “positive”

Cubs fans don’t like looking up at Cincinnati and Milwaukee in the National League Central standings.

Cincinnati?

Milwaukee?

So, too, proud Illinoisans don’t like looking up at New Jersey and the other 48 states, but that’s the spot we’re in even after Moody’s Investors Service last week raised the state’s credit rating by one notch, Capitol News Illinois reported. The upgrade still leaves the state with the worst credit rating in the nation, with Illinois’ general obligation bonds loitering just two ticks above junk status. (In the battle for the bottom, New Jersey finished second.)

Moody’s action was the first upgrade for Illinois in 23 years.

Two more rating agencies, Fitch Ratings and S&P Global Ratings, also upgraded their credit outlook for the state from “negative” to “positive,” citing the state’s improved financial condition.

There’s no question the upgrades represent good news for the Prairie State, with Gov. JB Pritzker being quick to point out that the state would save millions in interest costs.

The state received more good financial news this week when the Commission on Government Forecasting and Accountability reported that general fund revenues had risen nearly 18%, or $6.8 billion, during fiscal 2021. The rise was driven by large increases in personal and corporate income tax revenue and sales tax revenue that occurred when the state’s economy heated up more quickly than expected as pandemic restrictions were lifted.

Now back to reality.

Illinois still has a long way to go – not unlike the Cubs.

The Cubs, of course, are prepping for a reset that likely will see some stars of the 2016 World Series champs swapped for less-expensive prospects. That’s how you rebuild in the sports world.

Illinois needs a reset, too, but state government can’t trade its way to fiscal health.

Fortunately, the rating agencies provided a list of do’s and don’ts. Let’s hope lawmakers are paying attention.

“Enactment of recurring financial measures” to balance the state budget would be a plus, Moody’s said, along with “decisive actions to improve funding of the state’s main pension plans.”

From Fitch: “Continuation of the recent pattern of more normal fiscal decision-making, including on-time budgets that address fiscal challenges primarily with sustainable measures.” (You’re probably thinking that we shouldn’t be exchanging high-fives over on-time budgets, and we agree. But this is Illinois.)

The no-no’s, according to Moody’s, are any measures that “substantially add to the state’s near- or long-term liabilities, including reductions in pension contributions to provide fiscal relief” and anything that adds to the backlog of unpaid bills.

Also taboo, Fitch said: “Actions that materially exacerbate structural budget challenges, such as substantial use of one-time federal aid for recurring expenditures in future years.”

It wasn’t too many years ago that a county board chairman in northern Illinois remarked that if Abraham Lincoln was alive, he would still recognize the shape of state government. The chairman didn’t mean that as a compliment.

Over the decades, “Wait till next year” has been the Cubs’ counsel to impatient fans. Illinois has taken the same tack when it comes to pension reform and other measures needed to secure the state’s fiscal health. Well, despite the happy talk from Springfield, there are no more next years.

It is well past time for the state’s governing class to ask hard questions about what functions of government should stay, what should go and how we should pay for the whole thing. Perhaps we need a fresh look at the state Constitution, which would seem to be the only way to deal with what Fitch called “the very strong legal protections” afforded to retiree pensions. It’s worth a conversation.

Illinois lawmakers, who have created a legacy of debt, mismanagement and corruption when it comes to its finances, need to maintain this momentum and not allow this positive news to distract them from the urgent need to take strong measures to address the state’s fiscal health.