Gov. J.B. Pritzker will need more money to balance the state’s budget to the satisfaction of bondholders, credit rating agency Moody’s Investor Services said in a new report Tuesday.
Pritzker has promised to bring a balanced budget when he addresses the General Assembly on Feb. 20. But that could be challenging because the governor won’t be able to change the state’s income tax system to a progressive structure by then. And growth in existing revenue sources will be “tepid,” Moody’s reported.
Moody’s analysts said the coming fiscal 2020 budget will have to address the state’s pension contributions, which they noted are straining the budget even though the contribution is shortchanging liabilities, an operational deficit, and economic headwinds from the state’s shrinking population.
The report said that more revenue from a progressive tax structure wouldn’t happen in the coming fiscal year, but pointed to other areas like expanding gambling, legalization and taxation of recreational marijuana, and taxing other transactions as possible ways the state could shore up its books. However, the report warned about raising taxes on an economically vulnerable population.
“Governors have limited direct control over state economies, but the population loss and relatively sluggish employment trends suggest a degree of economic vulnerability that poses a conundrum: revenue growth from existing sources will be too tepid to offset escalating fixed costs, while new taxes could threaten to increase the outflow of residents,” the report said.
Moody’s rated the state’s bond as Baa3 stable, above junk grade, but not by much. According to the Illinois Comptroller’s website, Illinois has a bill backlog of nearly $8 billion.