For the first time in 23 years, Illinois’ credit rating actually improved, thanks to what Moody’s Investors Service considers a stronger state budget.
Any improvement is good news for Illinois residents because (just like individuals) states with higher credit ratings can borrow money at better interest rates.
But let’s not get too excited. Even after moving up a notch on the Moody scale, Illinois is still two notches lower than New Jersey, the next-lowest. Instead of being just a step away from junk bond status, Illinois is now two steps away.
Although Gov. J.B. Pritzker hailed the announcement as a convincing indication of Illinois’ improving economy, that might be overstating it. After all, this is just regaining a little of the ground lost during Gov. Bruce Rauner’s tenure when the rating fell three times.
It hasn’t always been that way.
Forty years ago, at the dawn of the 1980s, Illinois had $4.5 billion in unfunded pension debt and a perfect credit rating. That debt today has ballooned to $140 billion. A third of taxpayer dollars go toward debt, and essential services have been cut by one-third. Even though Illinois spent a record $10 billion on pensions last year — more than any other state in the country — the pension debt continues to mount.
This isn’t a Democrat problem. It isn’t a Republican problem. Year after year after year of bad political decision-making and unwarranted spending created this dilemma.
What’s worse than a state government in fiscal shambles? A state government in fiscal shambles that isn’t making it easy for citizens to check up on its spending.
The watchdog group Truth in Accounting ranks Illinois among the least fiscally transparent states in the nation. New Jersey is the only state that gets worse marks.
A string of problematic fiscal reporting (and lack thereof) contributed to Illinois’ ranking. In the midst of the pandemic, Illinois got a $1.2 billion loan from the Federal Reserve for costs related to COVID-19. The Fed insisted states had to certify they were solvent before getting loans. Somehow, this state with $226 billion of debt at the end of fiscal year 2019 claimed solvency. That shortfall breaks down to $52,600 per taxpayer.
As it continues to rack up debt, Illinois is paying full health benefits for thousands of state retirees. Fully subsidized benefits could cost $200,000 to $500,000 per retiree.
It’s time that Illinois politicians began living in the real world and move toward a sustainable path. The financial damage has been done in a bipartisan fashion and must be resolved with support on both sides of the aisle. Most importantly, Illinois taxpayers deserve to know how and why public dollars are being spent.