Whatever your political bent, the announcement of the second upgrade in Illinois’ credit rating in a year has to be a signal that the state is doing something right financially. The question is whether what it’s doing is right enough.
Last week, Moody’s Investment Service bumped the state’s rating up one level from Baa2 to Baa1.
In its rating announcement, Moody’s praised the state for shoring up its rainy-day fund and adding more than required to its pension debt. As a result, it said, “The state is on track to close the current fiscal 2022 with its strongest fund balance in over a decade.”
That is not faint praise by any means, but it also doesn’t necessarily imply a glowing picture. Illinois’ credit rating is still the lowest Moody’s rating among all the states, two grades below New Jersey’s second-lowest rating of A2.
And much of the source for Illinois’ brightening picture is a jolt of federal pandemic relief over the past two years. The real validity of the Moody’s increase – as well as expected similar increases from other credit-rating agencies – will be seen once the impact of the COVID-19 stimulus has waned.
That is by no means meant to throw cold water on what is clearly good news for the state and a tribute to Gov. JB Pritzker’s acknowledgment of the need to build stronger (actually any) financial reserves and take an aggressive approach to the pension-debt crisis. It is an overstatement, at least, to claim that the Moody’s upgrade is meaningless or that the state hasn’t made some correct moves in its handling of the budget in general or the federal stimulus in particular.
But it is meant as a reminder to beware the impulse to see a couple of improving financial benchmarks as proof that Illinois is on the path to unqualified prosperity. It is certainly no signal to take on new long-term spending goals or even, as some have suggested, permanent tax cuts.
As we noted in a recent editorial, a slew of pre-Election Day goodies are on the way to Illinoisans – including temporary freezes on grocery and gasoline taxes, a one-time property tax rebate and even some direct payments – but the true measure of such actions will be taken not before Election Day but after.
In the same way, we’re not going to be able to truly evaluate the status of Illinois’ finances until we’ve returned to a more normal and more predictable routine of costs and revenues.
In the meantime, it’s prudent to acknowledge that the investment agencies’ growing approval of the state’s financial picture is not yet confirmation that we are on the right path, but it at least demonstrates that we know where the path is.
And, truth be told, that has not been something one could say about financial management in Illinois for some time.
The Daily Herald