S&P, Moody's Downgrade Illinois to Near Junk, Lowest Ever for a U.S. State
* No end to budget impasse sends state to brink of junk rating
* State appropriations debt cut to below investment grade
Illinois had its bond rating downgraded to one step above junk by Moody’s Investors Service and S&P Global Ratings, the lowest ranking on record for a U.S. state, as the long-running political stalemate over the budget shows no signs of ending.
S&P warned that Illinois will likely lose its investment-grade status, an unprecedented step for a state, around July 1 if leaders haven’t agreed on a budget that chips away at the government’s chronic deficits. Moody’s followed S&P’s downgrade Thursday, citing Illinois’s underfunded pensions and the record backlog of bills that are equivalent to about 40 percent of its operating budget.
“Legislative gridlock has sidetracked efforts not only to address pension needs but also to achieve fiscal balance,” Ted Hampton, Moody’s analyst, said in a statement. “During the past year of fruitless negotiations and partisan wrangling, fundamental credit challenges have intensified enough to warrant a downgrade, regardless of whether a fiscal compromise is reached.”
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Update #1: "Now The Pain Begins": S&P, Moodys Cut Illinois To Near Junk, Lowest Ever Rating For A U.S. State (Zero Hedge)
WNU Editor: The debt crisis continues. First Puerto Rico .... and now a state like Illinois .... are the dominoes being set up for a big fall?
Update #2: Because the U.S. dollar is a world reserve currency .... the U.S. has the unique ability to print money at a level to finance its debts and spending that no country in the world can match. It is one of the reasons why the U.S. is a super power. This is why developments like this one where the supremacy of the US dollar is being chipped away should make all of us concerned .... because in the end it will impact all of our wallets. .... China’s Next Step to Destroy the Dollar (Byron King, Daily Reckoning).