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Published On: Mon, Jul 3rd, 2017

Illinois budget can’t be passed as credit rating downgrade looms

Illinois Senate President John Cullerton plans to call a spending and revenue package for a vote on Tuesday.

The Senate adjourned on Monday without taking votes on the revenue and spending measures, which had met with bipartisan support Sunday in the Illinois House. The record-long budget impasse will result in Illinois becoming the only U.S. state with a junk credit rating.

S&P Global Ratings called the weekend developments a “crucial step” toward ending the stalemate.

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“It’s been a political crisis, an unprecedented stalemate for over two years now and yesterday’s action was really the first break in that stalemate,” John Miller, co-head of fixed income at Nuveen Asset Management, said in an interview on Bloomberg Television. “We think they keep their investment grade ratings even though there’s still a lot of work to be done.”

Illinois has entered its third year without a budget because of a clash between the Republican governor and lawmakers over how to close the government’s chronic deficits. Unpaid bills have soared to a record $15 billion, and by August the state is set to run out of money for key expenses for the first time since the stalemate began, according to Comptroller Susana Mendoza, a Democrat.

That means school funding, state payroll and pension payments could be affected.

The agency concluded that if a budget is approved, any change in the state’s credit rating will depend in part on “the degree to which it closes the state’s structural deficit, provides a pathway for addressing the backlog of unpaid bills, and its impact on cash flows …”

The revenue, spending and budget implementation bills need 36 votes for approval. The budget implementation bill cleared the Illinois House on Monday. There are 37 Democrats in the Senate, but not all are on board for a tax hike. There is also a Democratic senator who is ill and would have to be brought in should they need his vote.

Meanwhile, Illinois House Speaker Michael Madigan said he plans to override any of Gov. Bruce Rauner’s threatened vetoes of the budget bills that had passed the House over the weekend. Madigan said he planned to meet with leaders again on Tuesday.

Illinois House Republican Leader Jim Durkin’s office said he won’t attend, citing a breakdown in negotiations.

Rauner criticized lawmakers for continuing “out of balance budgets with no real reform,” blaming Madigan.

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About the Author

- Catherine "Kaye" Wonderhouse, a proud descendant of the Wunderhaus family is the Colorado Correspondent who will add more coverage, interviews and reports from this midwest area.

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