A second Wall Street firm upgraded its credit rating for the state for the first time in over two decades on Thursday, citing “demonstrated operational controls” during the pandemic as a reason for the improvement.
S&P Global Ratings moved the state’s general obligation bond rating up from BBB- to BBB with a stable outlook — marking the first notch up from that Wall Street agency since 1997.
The global ratings agency is the third credit firm to improve the state’s credit rating or outlook in the past 15 days after years of downgrades.
Gov. J.B. Pritzker lauded the latest upgrade and said in a statement his administration has “remained steadfast in our goal to return Illinois to fiscal stability” and has made “responsible decisions” to get there.
“These responsible decisions are paying dividends, as evidenced by today’s upgrade from S&P, last week’s upgrade from Moody’s and our outlook rise to positive by Fitch,” the governor said. “My administration has worked diligently to make real progress, the rating agencies are acknowledging our progress and we remain committed to further strengthening Illinois’ fiscal standing.”
Across the aisle, Republicans said work still needs to be done.
State Senate Republican Leader Dan McConchie said that while any credit upgrade is “encouraging,” the state must change its budgeting practices in order to permanently escape its financial woes.
“People are going to criticize me and other Republican responses for being all doom and gloom — but they are wrong,” McConchie said in a statement.
“I believe that together we can make our home the greatest state in the nation. To do that, somebody is going to have to be an adult in the room and do their job.
“Instead of doing a victory lap pretending the financial problems have disappeared, we need to take these federal dollars and put them to good use by doing our job of producing long term solutions to Illinois’ very complex financial problems.”
S&P last upgraded the state’s bond rating in July 1997. It cited “improved liquidity,” “demonstrated operational controls during the COVID-19 pandemic” and an “improving economic condition” in making Thursday’s ratings change.
House Speaker Emanuel “Chris” Welch echoed Pritzker, saying in a statement he’s “incredibly proud of our state’s responsible financial choices that continue to improve our fiscal standing, as well as put hardworking Illinoisans and their families first.
“These are the types of positive changes you see when government leadership is truly working for the people they represent,” the Hillside Democrat said.
State Senate President Don Harmon said the upgrade is “further proof we are on the right track in balancing our fiscal realities with the real-world needs of working men and women.
“We are moving Illinois forward by paying our debts while at the same time investing in education, health care, child care and other key programs people need to get ahead,” the Oak Park Democrat said in a statement.
The move follows an upgrade from Moody’s Investors Service on June 29, raising the state’s credit rating to Baa2 from Baa3 and giving the state’s general obligation bond outlook a stable rating because of “material improvement in the state’s finances,” according to the agency’s news release.
Moody’s marked the first upgrade from any of the three main rating agencies in more than two decades — a development Pritzker at the time said showed “we are well on our way.”
“After the most difficult year in memory, Illinois is making a major comeback,” Pritzker said last week.
A state’s bond rating is a way to measure its credit quality — a higher bond rating generally means the state can borrow at a lower interest rate.
Illinois’ rating had hovered at an investment grade level just above “junk bond” status.
Days before Moody’s announced its upgrade, Fitch upgraded its rating outlook from negative to positive.
Fitch also pointed to the state’s economic recovery, the 2022 state budget as well as other financial moves it said “suggest further improvements in the state’s operating performance and structural balance in the near and medium-term that could support a return to the pre-pandemic rating or higher.”