CHICAGO (Reuters) - Illinois Governor Bruce Rauner said on Thursday that the state could be hit with more credit rating downgrades if an impasse over structural reforms and a budget for the fiscal year that began on July 1 continues.
“I wouldn’t be surprised if we don’t get something done there’ll be more of it. It’s highly appropriate,” he told reporters a day after the ratings on Chicago convention center bonds were severely downgraded as a result of the stalemate between Rauner and Democrats who control the state legislature.
The Republican governor, who took office in January, said he did not cause the fiscal problems engulfing the state and Chicago, its largest city, but he intends to fix them. He added the solution is reforming government, not higher taxes.
Illinois’ chronic budget deficits and big pension funding problems have left it with the lowest credit ratings and highest borrowing costs among the 50 states.
Standard & Poor’s warned last month it could take action on Illinois’ A-minus rating by September if “there is limited progress in budget deliberations or if credit fundamentals weaken.” S&P has dropped only three states into the low-investment grade triple-B level: California in 2003, Massachusetts in 1989 and Louisiana in 1988.
On Wednesday, S&P and Fitch Ratings downgraded more than $3 billion of bonds issued by Chicago’s Metropolitan Pier and Exposition Authority by several notches to BBB-plus because the lack of a state appropriation blocked a monthly transfer of tax revenue to the bond trustee.
Rauner continued to blast Democrats and House Speaker Michael Madigan for resisting his so-called turnaround agenda, which includes legislative term limits, a local property tax freeze coupled with curbs on collective bargaining, and business-friendly reforms. He said he is willing to support measures to rescue the Chicago Public Schools from crippling pension payments if city officials, including Mayor Rahm Emanuel, throw their support behind his reform agenda.
“This has got to be a two-way partnership,” Rauner said.
Reporting by Karen Pierog; Editing by Matthew Lewis