Illinois Downgraded by Fitch as State Budget Crisis Worsens

Bloomberg reports:

Illinois was lowered to three steps above junk by Fitch Ratings amid a political stalemate that has left the state without a budget for nearly four months, worsening a financial crisis that has already triggered credit downgrades to cities and local agencies.

The one-step downgrade to BBB+ from A- affects $26.8 billion of general-obligation bonds. Fitch said in a statement that its outlook is now stable. Illinois is already the worst-rated state with an A3 by Moody’s Investors Service, four steps above junk, and an equivalent A- by Standard & Poor’s.

The nation’s fifth-most-populous state is grappling with more than $6 billion of unpaid bills because the Democrat-controlled legislature and Republican Governor Bruce Rauner can’t agree on a spending plan for the year that started July 1. The Chicago school district’s credit rating was cut to junk in August as it waited on state help to close its own deficit and securities sold by the city’s convention center slid after lawmakers were slow to appropriate funds, resulting in a seven-level downgrade by S&P.

“The market has been telling us for a long time that Illinois is BBB,” said Jason Diefenthaler, who runs a high-yield muni fund at Wasmer Schroeder & Co. in Naples, Florida. “You can only rationalize the difference in opinion between the market and the rating agencies for so long before one side wins out.”

The great moments of Blue America!