Citing continued deterioration of the state’s financial flexibility in the ongoing budget impasse, among other factors, Illinois has been downgraded to BBB+ from A- by the Fitch ratings agency. In a news release Fitch says Illinois’ inability to balance its operations, eliminate accumulated liabilities and grow reserves leaves it far more vulnerable to the next economic downturn.
The ratings agency also cites ongoing budget gaps, high long-term pension liabilities, and a weak recovery. The report also says failure to enact measures that lead to ongoing budget balances beyond fiscal year 2016 could lead to further negative rating action, but a positive rating action could come from successful implementation of measures to enact a structurally balanced budget that reduces accumulated budget liabilities. Other report highlights include the one-time solution to close the budget gap at the end of the previous fiscal year and the current fiscal year spending being above expected revenues.