Fitch Rates Illinois $290MM GO Refunding Bonds 'AA'.NEW YORK New York, state, United States
New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings
An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. assigns an 'AA' rating to approximately $290 million State of Illinois general obligation bonds (GOs), refunding series of June 2006. The bonds, maturing Jan. 1, 2007-2021, are expected to sell through negotiation with a syndicate led by Loop Capital Markets as early as tomorrow. Fitch also affirms the 'AA' rating of $20.5 billion outstanding Illinois long-term GOs. The Rating Outlook remains Negative.
Illinois' 'AA' rating is based on the breadth and wealth of its economy, which is now gaining momentum, its moderate debt burden, and improving revenue performance. The Negative Rating Outlook reflects continued financial constraints, as evidenced by a budgetary basis deficit which has persisted for many years. The statutory plan to address Illinois massive unfunded and long-standing pension liability calls for the state's contribution to grow from $1.4 billion now to $3.8 billion in 2010; the increase is equal to about 9% of the present total expenditure level. Revenues are exceeding estimates this year and both capital and expenditure growth has been restrained. However, Fitch believes that barring a significant revenue increase or a substantial reduction in expenditures, Illinois will be unable to follow its own plan to contain the $39 billion unfunded pension liability. This intractable problem, including cash flow pressures, is apt to impair credit quality.
Illinois' economy has gradually gained momentum since it began posting year-over-year job gains in the summer of 2004. April employment was 0.9% over one year prior, although it still lags the U.S. growth rate and is significantly below the 2000 peak. Job growth has been strongest in the Chicago region, and in the leisure, professional services (job) professional services - A department of a supplier providing consultancy and programming manpower for the supplier's products. , and finance sectors. Manufacturing continues to decline, as it has throughout the Great Lakes region The Great Lakes region can refer to:
As the economy has improved, so have state revenue collections. Fiscal 2005 collections were 8% above 2004, led by strong personal and corporate income taxes. Through May 31, fiscal 2006 state revenue growth is 6.8%, with net individual income taxes up 8.2% and sales tax sales tax, levy on the sale of goods or services, generally calculated as a percentage of the selling price, and sometimes called a purchase tax. It is usually collected in the form of an extra charge by the retailer, who remits the tax to the government. up 7% over 2005. Expenditure growth has been limited. Cash balances, including the stabilization fund Stabilization fund may refer to:
See: Generally Accepted Accounting Principles
See generally accepted accounting principles (GAAP). undesignated general fund balance deficit, which equaled $2.6 billion, or 10.1% of annual general fund revenues, at the end of fiscal 2004. Fiscal 2005 GAAP results are not available although state officials expect a fiscal 2005 audit to be published this summer.
Authorized fiscal 2007 operating spending of $25.8 billion is 5.2% above that projected for fiscal 2006. Projected state source revenues of $23.3 billion is 3% over fiscal 2006, using conservatively projected income tax growth of 2.9% and sales tax growth of 3.1%. The Governor has announced his intention to propose a sale of the state's lottery to fund additional education spending over multiple years. Other asset sales are also under consideration.
The pension bonds, issued in 2003, increased the state's tax-supported debt to an upper moderate level. Tax-supported debt, at $23.7 billion, equals 5.1% of personal income. Excluding pension debt not used for budgetary purposes, debt equals a more modest 3.4% of personal income, reflecting disciplined debt issuance for capital purposes. The current issue is for refunding purposes only.
Still, one of the state's challenges remains the funding of its pensions. As of June 30, 2005, unfunded accrued actuarial ac·tu·ar·y
n. pl. ac·tu·ar·ies
A statistician who computes insurance risks and premiums.
[Latin liability was $38.6 billion, resulting in a 60% funded ratio. While this ratio improved after the 2003 financing and the benefit reforms of 2005, partial pension funding holidays and market performance have constrained con·strain
tr.v. con·strained, con·strain·ing, con·strains
1. To compel by physical, moral, or circumstantial force; oblige: felt constrained to object. See Synonyms at force.
2. further funding improvement.
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