It’s well known that Illinois continues to have the worst credit rating in the nation, but a recently published chart comparing trends across the country highlights a disturbing trend as the state’s credit rating is expected to drop, even as most other states are steadily improving their credit ratings and fiscal climates.
A chart from Pew Research, showing credit ratings over the past decade, shows that not only is Illinois ranked dead last among the 50 states, but the state’s falling credit rating is running in the opposite direction of the rest of the nation – with other states either improving their credit rating or remaining stable.
From years of piling up pension deficits to continued outspending of state revenue, Illinois’s credibility has quickly deteriorated among the top rating agencies, and is expected to worsen as the recently approved budget fails to rein in spending, appropriate funds toward the state’s $4.9 billion bill backlog, pay the court-mandated state employee back wages or account for an expiring 67% tax hike.
While surrounding states such as Indiana, Missouri and Iowa have excellent credit ratings, Illinois continues to regress as economic uncertainty continues to plague the business community. Even California—which was once tied for last place with Illinois—has improved its rating significantly as it paid down debt and restored a balanced budget in 2013.
Indiana shows an interesting contrast. The Hoosier state hit a low point in 2004 when its Standard & Poor’s rating fell to AA status. In the following years, it has climbed back. Today Indiana’s AAA rating is the best available and higher than that state’s ranking at the beginning of the 2000s. Illinois on the other hand, also had a AA ranking in 2004, but has steadily fallen since then and now holds an A-, which is lower than any other state.
Illinois’ inability to curb spending and implement true fiscal reforms has led to five credit downgrades over the last five years. This year’s budget signals more downgrades, as it relies on interfund borrowing and delaying payments to state agencies to afford new and expanded spending measures.
As spending continues to outpace revenue, many on Wall Street warn of more downgrades for Illinois’ already dismal credit reputation. Republicans push for responsible budgeting such as cutting spending for failed programs, reinstating bipartisan Medicaid reforms, reducing the size of state government and preventing more tax increases to reduce uncertainty and restore Illinois’ credit reputation.