The state of Illinois is set to issue $1.8 billion in general obligation bonds to fund accelerated pension benefit payments and capital expenditures through the Rebuild Illinois program. The bond issue consists of $250 million taxable Series 2024A and $1.55 billion tax-exempt Series 2024B. The bonds are expected to be fixed-rate and will be priced this week. The deal will be managed by Jefferies, Siebert Williams Shank, and Barclays, with Public Resources Advisory Group serving as the municipal advisor. According to offering documents, the state has already deposited a significant amount into the Budget Stabilization Fund, showing a commitment to improving its financial stability.
Moody’s Ratings recently revised Illinois’ outlook to positive from stable, citing improvements in the state’s fund balance, budget reserves, and stable revenue. The state and the bonds are currently rated A3 by Moody’s. Fitch also upgraded Illinois’ issuer default rating to A-minus with a stable outlook in November. S&P Global Ratings affirmed its A-minus rating with a stable outlook, highlighting the state’s progress in improving its budget alignment and paying down liabilities.
Despite the positive outlook, Fitch noted that Illinois’ operating performance still lags behind most other states, mainly due to structural imbalances related to underfunding pension liabilities. The state has been making efforts to address these issues, but gaps in pension contributions remain. The state has reduced its legacy bill backlog significantly since 2017, indicating progress in managing its financial obligations.
Economic Indicators
Illinois highlighted declining unemployment rates and rising per capita income in its investor presentation. The state’s per capita income in 2023 was reported to be higher than both national and regional averages, demonstrating positive economic trends. However, the state still faces challenges related to its high carrying costs and contribution demands for retiree benefits.
Future Outlook
Looking ahead, Illinois is projected to have a budget surplus in fiscal 2024 and 2025, indicating a positive financial outlook. The state’s general fund cash balance has also recovered, showing resilience in managing its finances. However, the state’s high level of outstanding GO bonds raises concerns about its overall debt burden and ability to meet future obligations.
Illinois’ issuance of $1.8 billion in general obligation bonds reflects the state’s efforts to address pension liabilities and fund critical infrastructure projects. While the state has made progress in improving its financial stability, challenges remain in addressing structural imbalances and reducing debt levels. It will be important for Illinois to continue its fiscal discipline and implement long-term strategies to ensure sustainable financial health.