Fitch Ratings downgraded the state of Illinois' rating on $26.8 billion in outstanding general obligation bonds to BBB+ from A- on Monday, the credit agency announced in a news release.
The agency cited the state's “inability to balance its operations, eliminate accumulated liabilities and grow reserves during a period of economic expansion leaves it far more vulnerable to the next economic downturn.”
The state has been operating without a budget since the fiscal year began July 1.
“The state continues to spend in most areas at the fiscal 2015 rate, which is expected to lead to a sizable deficit. As was the case during the most recent recession, this deficit spending is likely to be addressed by deferring state payments and increasing accumulated liabilities,” the statement said.
State Comptroller Leslie Geissler Munger announced Oct. 14 that the state will delay its November pension contribution because of the budget impasse.
Illinois' five state defined benefit plans' liabilities totaled $111.2 billion, with a funding ratio of 39.3% as of June 30, 2014, the worst of any state in the country.
Fitch had announced in December it would maintain the A- rating until after the Illinois Supreme Court decided on the constitutionality of a December 2013 pension reform law aimed at bringing the state's retirement systems to full funding.
However, the court ruled in May the law violated a clause in the state constitution that pension benefits “shall not be diminished or impaired.”