STATE’S BOND RATING DOWNGRADED AGAIN

A major credit rating agency this week downgraded the state’s general obligation bond rating, warning that the rating could drop further if nothing is done to address Illinois’ massive deficit and multi-billion-dollar bill backlog.

Despite recent action by state lawmakers to ward off the possible downgrade—passing a pension reform measure to show Illinois is working to get its fiscal house in order—Fitch Ratings downgraded the state’s rating while maintaining a continued Rating Watch Negative. On March 26, Standard & Poor placed Illinois on a negative credit watch, and Moody’s Investors Service has also affirmed its negative outlook.

While commending the pension reforms, Fitch Ratings focused more on the overall fiscal mismanagement of the state under Governor Pat Quinn and legislative Democrats. In issuing the downgrade, the rating agency said, “The rating downgrade reflects the magnitude and persistent nature of the state’s fiscal problems and the likelihood that the budget to be enacted for fiscal year (FY) 2011 will not sufficiently address either the annual operating deficit or accumulated liabilities.”

Fitch highlighted Quinn’s plan to borrow nearly $5 billion more than the state will take in, and defer payments to state vendors, in order to avoid difficult budget decisions.

“The state continues to manage its budgetary deficit by deferring payments to vendors and others,” the agency added, while also pointing out that “the state expects to use additional deficit borrowing to close its projected budget gap.”

In December 2009, the credit rating agency said that a downgrade was probable if the state did not take significant strides to address its substantial debt. Fitch noted that it seems unlikely Illinois would take those steps: “…it appears now that budget solutions will continue to be pushed out to the future, budgetary balance will continue to rely on sizeable borrowing, and those reliant on state payments will continue to have long waits to be paid.”

Though the agency noted that the state’s recent attempt to lower its pension liabilities is a “credit positive,” the short-term benefit is negligible and thus did not substantially benefit Illinois when it came to maintaining the state’s previous A bond rating.

By placing the state on Rating Watch Negative, Fitch Ratings acknowledges that the state is likely to face further downgrades of its credit rating. Only California has a lower credit rating from all three agencies than Illinois.

COMMITTEE EXAMINES LOSS OF TRADE SHOWS

Also this week, members of the Joint Committee on the Metropolitan Pier and Exposition Authority met to address the issue of lucrative trade shows leaving Chicago.

A panel of show managers and show exhibitors testified before lawmakers on April 1 in Chicago. An exodus of trade shows—representing an industry that brings revenues to state and Chicago coffers—has lawmakers concerned about the competitiveness and appeal of Chicago’s McCormick Place convention center.

Show managers and exhibitors explained that antiquated rules and other problems at the Metropolitan Pier and Exposition Authority, known as McPier, has made the facility less desirable, and has forced them to consider moving to other venues out of state. The loss of several major trade shows to less expensive venues in other cities, like Las Vegas and Orlando, prompted the formation of the Joint Committee on the Metropolitan Pier and Exposition Authority.

Legislators hope that testimony from show managers and exhibitors, and insights from representatives at McPier will provide guidance in how to best restore McCormick Place as a viable option for high-profile, lucrative trade shows. Next week, the committee will hear from union representatives and McCormick Place officials.

HAPPY EASTER!

On behalf of the staff at my legislative offices, I wish you and yours a Happy Easter!