Lake County Gazette

Illinois’ financial predicament has ushered in problem after problem. The most recent setback is a credit downgrade by S&P Global Ratings, which dropped the state’s bond rating one notch, from BBB+ to BBB.

  

S&P cited the state’s budgetary and pension problems as the primary factors for the reduction.

Martin Blumenthal said the trajectory upon which the state is headed will lead to failure. | Contributed photo

Martin Blumenthal, the Republican candidate for the District 58 state House seat, said the credit reduction will be costly to the state.

“We’re so close to junk status, it is ridiculous,” Blumenthal told the Lake County Gazette. “The more we borrow, the shakier it gets. The problem with these downgrades in credit ratings is that not only are we borrowing money, we are now paying more to borrow.”

S&P said the causes of the downgrade include a long history of spending without a budget, government leaders' inability to address the fiscal imbalance, the large deficit,  pension liability and debt burden.

Blumenthal said the consequences of this drop will hit taxpayers hard: Interest rates will go up to offset the risks to the bond holders.

“It (will) cost us tens of millions of dollars extra in interest because of the downgrade,” Blumenthal said. “I haven’t actually seen the terms of the bonds, but it is my understanding that these bond holders have priority over everyone. Any money that comes out of the state’s checking account goes first to them. They get a pretty good deal on that.”

Blumenthal said Illinois has to start changing the way it handles its finances.

“The borrowing has to stop,” Blumenthal said. “We have to start paying off the debt to save the state. The more we pay off, the better our credit rating will be. We have to start concentrating on that and budgeting money to service our debt.”

The question of the state’s debt is also under scrutiny, as a recent report indicates that a potential $9.1 billion carry-forward deficit from last year may cause the projected fiscal 2017 deficit to jump to as much as $16.9 billion. This is not good news, Blumenthal said.

“We’re out of money now,” Blumenthal said. “If it doubles…if we double the income tax, it wouldn’t necessarily, at this point, even make a dent to the debt. Of course, if we do that, we are going to lose more people between the income taxes and property taxes.”

Blumenthal said the state may have to raise income taxes to chip at the massive deficit.

"I don’t see any way around that,” Blumenthal said. “But it won’t even make a dent if our current debt is doubled.”

Solutions will be difficult, as the state will need to start cutting non-essential services.

“We have to really investigate to see why this debt is going up so much and really start slashing budget and raising revenue,” Blumenthal said. “Slash all non-essential services. If it has nothing to do with people directly, like education or health, then we just have to eliminate it. We just have to bite the bullet.”

Blumenthal said the trajectory upon which the state is headed will lead to failure.

“It’s not sustainable,” Blumenthal said. “We can’t print money like the federal government can. Even then, it is not a permanent solution. I just don’t see how the state can ever get out of what is a bottomless pit.”