Illinois Policy Institute: Moody’s warns delay of state funding for Illinois schools a ‘credit negative’

SPRINGFIELD/CHICAGO (Illinois Policy Institute) — State lawmakers keep giving ratings agencies reasons to downgrade Illinois government: pension crises, years of bad budgets and a two-year budget impasse are just a few examples. All have caused the credit ratings of various Illinois governments – from cities to universities to the state itself – to collapse. Many are now junk-rated and the state is just one notch away from junk itself.

Now the ratings agencies have yet another reason to downgrade some Illinois governments: the state’s failure to send education funding to school districts like it was supposed to this week.

The state missed making its payments to districts because state money for education has not technically been appropriated yet. The money is locked up due to the current fight in Springfield over the state’s new education funding formula bill and the bailout of Chicago Public Schools it contains.

Until lawmakers resolve that fight, the state won’t be able to distribute education funding. And that means school districts are at risk of being downgraded.

Moody’s Investors Service warned Illinois school districts on August 16 that the state’s failure to distribute state aid on time is a “credit negative” for Illinois’ school districts.

The ratings agency also warned that property-poor districts will be the most negatively affected if the school funding impasse continues.

Many districts in Illinois are heavily dependent on state education dollars in order to function. Without state aid, several districts have warned they’ll run out of funds in just a few months.

Illinois school districts are at risk of a downgrade and students are at risk of missing school because of lawmakers’ willingness to play games with education funding.

Two months ago, the General Assembly passed a record-spending budget – which included a $ 5 billion dollar tax hike. The budget funded everything, from social services to higher education to Medicaid, except K-12 education.

Education funding was made dependent on the passage of the new education funding bill, Senate Bill 1. But SB 1 was withheld by the Illlinois Senate from Gov. Bruce Rauner for nearly two months. Lawmakers were trying to force the governor to sign the bill by waiting until school was about to start before sending it to his desk.

Lawmakers finally sent SB 1 to Rauner at the beginning of August. Rauner placed an amendatory veto on the bill, cutting out the Chicago bailout language and creating a more level playing field for districts going forward.

Since then, the Senate has voted to override the governor’s amendatory veto. No vote has happened in the Illinois House yet.

The two-month delay lawmakers’ engineered has brought Illinois to the brink of yet another crisis.

Lawmakers are arguing about the incredibly complex education funding system – and the governor’s amendatory veto – just days before many schools are set to open for the year.

That isn’t right. Illinois’ school children – and school district funding – should not be used as pawns in yet another political fight.

If politicians can’t agree on an education funding solution immediately, they should implement the state’s existing education funding formula – as flawed as it may be – so children can attend school without disruption.

With funding in place, lawmakers can get back to negotiating education funding reform without a crisis looming over them. And school districts across the state won’t be at risk of more downgrades.