Fitch Ratings raised its credit outlook for Illinois to stable from negative Friday, citing the recent increase in corporate and personal income taxes.
“Following several years during which the state was unwilling to take action to restructure its budget to achieve balance and increased reliance on borrowing to close budget gaps, the tax increase and enacted spending limits close a significant portion of the structural gap in the state’s budget through fiscal 2014,” the credit agency said.
Fitch also affirmed its A rating on $24.5 billion of outstanding general obligation bonds issued by Illinois.
That is five notches above non-investment grade debt. Issuers prize high credit ratings because a higher rating reduce how much it costs them to borrow money.
State finance officials were not immediately available to comment on the outlook improvement.
Illinois’ income tax hike, which drew widespread attention in the $2.8 trillion municipal market because other states have been wary of raising taxes, should give the state $6.8 billion a year.
The revenue infusion will help the state pay off a huge backlog of unpaid bills, staving off a deficit that was projected to grow as high as $15 billion.
But Fitch said challenges still lie ahead.
“Because the tax increases are temporary, the state will need to find a more permanent solution to the mismatch between spending and revenues,” the credit agency said.
“Further, despite the significant increase in tax revenues, the state is expected to continue to rely on one-time revenues, including the expected use of debt financing for operations, in fiscal 2012,” it added.
Come on, your link has a typo! Is it too much to ask that you proofread your work? This is a professional paper, stop being so sloppy.
This is actually good news since Fitch actually does informed research compared to Moody’s and S&P. Just think how the outlook would improve if the people who are most concerned about their political careers rather than the constituents which they are intended to serve and attacked the out of control spending, starting with the outrageous (and arguably criminal) pension system which allows last minute raises to lock in higher, unjustified pension benefits for teachers. Illinois should be the first state to take advantage of any changes to federal bankruptcy laws that would make it easier for states to file for bankruptcy and wipe out the pension windfalls.
the positive statement by Fitch is based on the assumption that the recent tax increases actually produce the revenue that was projected : an additional $6 billion, roughly. If this does not happen , Illinois could be back in trouble.
ejhickey,
while there’s always a danger of regression, chances are IL will beat out estimates. It’s adding jobs, which is more than I can say about a lot of other states.