CHICAGO (Reuters) – Illinois became the first state to get a negative rating outlook in the wake of the coronavirus crisis, which will put the state’s finances and economy under pressure, an S&P Global Ratings analyst said on Monday.
The action followed outlook revisions for Connecticut and New Hampshire to stable from positive, according to Geoffrey Buswick at S&P.
He said the revision of the outlook on Illinois’ BBB-minus rating to negative from stable covers a year in which its tax collections, budget management, federal monetary support and other factors will be evaluated.
Illinois is the lowest-rated U.S. state, and if downgraded a notch by S&P, would be the first to sink into junk since Arkansas in the 1930s.
Even before the virus hit, the state was burdened with high pension and debt service costs, a big pile of unpaid bills and had a negligible rainy day fund.
“These attributes could limit flexibility in addressing the costs of the fight against the coronavirus and the potential loss in revenues closing out fiscal 2020 and into fiscal 2021,” S&P said in a report.
Illinois’ fiscal year begins July 1 and its legislature, which has suspended session due to the virus, has yet to act on a new budget.
At his Monday media briefing on the coronavirus, Illinois Governor J.B. Pritzker said his office was looking at how to get expenses and revenue in line after his stay-at-home order shuttered non-essential businesses and services.
While Illinois and other states would be reimbursed for virus-related expenses as part of a $2.3 trillion federal stimulus package, the money will not make up for billions of dollars in lost revenue.
“The truth is we are going to need more. Every state is going to need more. Every state’s revenues have cratered,” Pritzker said.
To date, Illinois has reported a total of 12,262 coronavirus cases, including 307 deaths.
S&P revises outlook on Illinois’ credit rating to negative on virus concerns
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