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Upcoming state elections cast shadow over Illinois budget prospects

From Reuters - February 12, 2018

CHICAGO (Reuters) - Illinois upcoming elections are casting a shadow over the states ability to pass a new budget, tackle its financial liabilities and keep its credit ratings from sinking into junk, analysts said.

Illinois is a prime example of U.S. state fiscal woes. With a huge $129 billion unfunded pension liability and a chronic unpaid bill backlog, it has the lowest credit ratings among states, and political dysfunction left it without complete budgets for an unprecedented two-straight fiscal years.

The Democratic-controlled legislature, with the help of some Republican votes, finally enacted a fiscal 2018 budget in July over Governor Bruce Rauners vetoes. On Wednesday, Rauner, a Republican, is set to unveil his fiscal 2019 budget plan.

This coming budget process is really important for the states creditworthiness, said Gabriel Petek, an analyst at S&P Global Ratings, which rates Illinois one notch above junk at BBB-minus. The fact its an election year usually does not make the process easier.

He added there was no sign the political battle between Rauner and Democrats that led to the budget impasse had eased.

Rauner, seeking a second term in November, is facing one primary opponent, while six Democratic candidates are also vying for the nomination. In the legislature, 157 of the 177 seats are up for election.

BUDGET TIGHT SPOT

The governor has promised to produce a balanced fiscal 2019 budget that includes a path toward rolling back a $5 billion income tax hike the legislature approved over his veto last year.

Democrats are dubious.

Im waiting anxiously to hear his speech and his proposals and see the math of how this works, said State Representative Greg Harris, House Democrats budget point person.

House Speaker Michael Madigan, the target of a long-shot Rauner effort to strip him of his long-time leadership post, has suggested the governor remain on the sidelines this session, while lawmakers work in a bipartisan fashion to move the state forward.

Even if Illinois slows expenditure growth, which hasoutpaced revenue growth, to the lowest rate among states, it would take almost two decades to achieve a balanced budget, according to David Merriman, co-director of the Fiscal Futures Project at the University of Illinois Institute of Government and Public Affairs.

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