A key rating agency dropped Illinois’ credit outlook from stable to negative Friday, a move that could make it more expensive to pay for an ongoing statewide construction program aimed a building new roads, schools and bridges.
The warning shot from Moody’s Investors Service came as Gov. Pat Quinn said Friday that he and lawmakers were weighing a menu of new taxes to shore up funding for the public works plan that he indicated is running low on funds.
The estimated $250 million to $300 million a year shortfall is due to a lengthy delay in launching video gambling at bars and restaurants across Illinois, as well as a higher than expected number of communities opting to ban the machines. If lawmakers don’t approve new funding methods, Quinn said projects initially slated for completion by 2015 would take longer to finish.
“There is a revenue shortfall,” Quinn said. “We have to address that, there are ways to do that by closing loopholes and I think that’s something that we can do without burdening the public in any serious way and the bottom line is creating jobs. Economic growth, that is what the public wants. I think that’s what everybody wants.”
Details are scarce, but a memo to House Democrats lists ideas such as taxing oil companies that drill out at sea, eliminating tax exemptions for biodiesel and ethanol fuel, adding a new tax for satellite television customers and changing the way taxes are collected when someone trades in an old car for a new vehicle.
Other suggestions include implementing an online sales tax for goods sold online and creating a new fee for digital downloads — an idea the governor first floated in 2010 before abandoning after it received a cold reception.
Quinn said the ideas were a mix of proposals he has long supported as well as new pitches made by lawmakers. A spokesman for House Speaker Michael Madigan, D-Chicago, said it was too soon to tell what kind of traction they might have in Springfield.
The list of potential taxes emerged after Moody’s lowered the state’s credit outlook from stable to negative — a possible indicator that the rating agency soon may be poised to drop Illinois’ credit rating even lower. Moody’s already has pegged Illinois with the worst rating in the country, which Quinn said could make it more expensive for the state to borrow money to pay for construction projects.
Republican Treasurer Dan Rutherford contends taxpayers already are paying for the low rating, saying Illinois has shelled out an extra $70 million in interest on $800 million in borrowing made in recent months.
Reforming the state’s trouble public employee pension system is key to stabilizing Illinois’ credit rating. However, Moody’s expressed concern that legislators may produce changes that yield only a “marginal effect” on a system projected to be $96 billion in debt. The rating service indicated that political pressure may work against a sweeping fix and any new legislation may be tied up in courts for years.
Still, Quinn said he was optimistic lawmakers could pass sweeping changes when they return to Springfield in January.
“Our job is to get it done, and we’re going to do it in the coming several weeks,” Quinn said.