(The Center Square) – In May, Illinois saw its credit rating from S&P Global Rating increase. But the latest newsletter from the ratings agency shows the state has the worst overall credit in the country.
The S&P newsletter shows which U.S. states have increased their credit ratings and which states have decreased their ratings throughout 2022.
Illinois saw its overall credit rating increase from BBB with a positive outlook to BBB+ with a stable outlook this year.
Although the state saw an upgrade, it still have the worst rating in the country. Sheila Weinberg of Truth in Accounting explained what this means for Illinois.
“It is the risk that the bondholders will not get their money back,” Weinberg said. “It is not the rating of the government’s overall financial position but what is the risk that the bond holders we have to borrow from will not get paid back.”
Weinberg said the ratings are essential because agencies assign states credit scores so that if consumers want to invest in government-issued bonds, they will understand the government’s ability to return their initial investment and pay any interest due.
Weinberg told The Center Square that the stable rating forecast could signify things to come.
“You have to remember the reason you get an updated credit rating is because the state is planning on borrowing money,” Weinberg said. “If the state were not in a poor financial state, it would not need to borrow money at all.”
Weinberg also said the poor rating exasperates the issues the state is already dealing with.
“They are in huge debt, so when they need to borrow money, it makes it more difficult,” Weinberg said. “That then creates a higher interest cost.”
Illinois taxpayers could be on the hook for higher taxes due to the higher interest rate for borrowing.
