$19.4B in Illinois State Bonds May Be Cut Again By Fitch
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Fitch Ratings placed an 'A' rating on $3.466 billion of State of Illinois general obligation bonds taxable series of January 2010 late yesterday, and also placed the 'A' rating on $19.4 billion of outstanding Illinois long-term GOs on Rating Watch Negative.
This move follows a decision by Fitch in July to cut the state's credit rating to the sixth of 10 investment grades.
Fitch said the Rating Watch Negative placement reflects the magnitude and persistent nature of the state's fiscal problems and will be resolved after an assessment of the extent to which the state addresses its funding imbalances in the context of the legislative session that begins in February and the development of a budget for fiscal year 2011.
Fitch said the enacted fiscal 2010 budget did not address the sizeable accumulated deficit and relied on non-recurring measures, including the current borrowing, to close the current fiscal year budgetary gap. They also said deteriorating revenues and an inability to achieve the budgetary measures enacted have opened up a $2 billion gap in the FY 2010 budget, equal to 7% of general fund resources.
Despite issuing a total of $2.25 billion in short-term notes (in June and August), the state's cash position is weak, Fitch claims.
The firm said failure to enact budgetary measures that significantly reduce the deficit on an ongoing basis or to address the cumulative budget deficit and significantly reduce the accounts payable balance could trigger a debt downgrade.
This move follows a decision by Fitch in July to cut the state's credit rating to the sixth of 10 investment grades.
Fitch said the Rating Watch Negative placement reflects the magnitude and persistent nature of the state's fiscal problems and will be resolved after an assessment of the extent to which the state addresses its funding imbalances in the context of the legislative session that begins in February and the development of a budget for fiscal year 2011.
Fitch said the enacted fiscal 2010 budget did not address the sizeable accumulated deficit and relied on non-recurring measures, including the current borrowing, to close the current fiscal year budgetary gap. They also said deteriorating revenues and an inability to achieve the budgetary measures enacted have opened up a $2 billion gap in the FY 2010 budget, equal to 7% of general fund resources.
Despite issuing a total of $2.25 billion in short-term notes (in June and August), the state's cash position is weak, Fitch claims.
The firm said failure to enact budgetary measures that significantly reduce the deficit on an ongoing basis or to address the cumulative budget deficit and significantly reduce the accounts payable balance could trigger a debt downgrade.
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