Illinois rating momentum carries transit and universities along
4 min readIllinois’ rosier near-term fiscal landscape and state bond rating momentum helped lift the ratings of public transit agencies and the state’s public universities and more than $5 billion of rated debt.
Earlier this month, Moody’s Investors Service upgraded the Illinois Regional Transportation Authority’s $1.7 billion of general obligation bonds to Aa3 from A1 due the “resiliency in the authority’s tax base following a rapid rebound in taxes after the drop in 2020” and “the expectation that state funding will remain stable and timely given improved fiscal conditions of the State of Illinois.” The outlook remains stable.
Illinois’ healthier balance sheet and economic rebound helped by $8 billion in federal relief drove recent one-notch upgrades to the state from Fitch Ratings, Moody’s, and S&P Global Ratings to BBB-plus and Baa1.
The RTA, which provides fiscal oversight of the Chicago Transit Authority, Metra commuter rail service and Pace suburban bus service, relies on a mix of sales taxes collected in a six-county region and state public transit aid to supplement system revenues.
The state’s past budget woes drove lengthy delays in the transfer of aid forcing the agency to issue short-term notes to manage cash flow.
“The state is currently making distributions in a timely manner,” Moody’s said. “The stable outlook reflects the expectation of revenue stability over the coming one to two years.”
The upgrade is all the more notable as it comes amid public transit’s ongoing ridership struggles. The RTA’s service boards suffered deep fiscal losses as ridership plummeted early in the COVID-19 pandemic. The CTA maintained service levels while the others scaled back some services.
Federal relief totaling $3.37 billion has covered the losses and it’s expected to smooth operations through the third quarter of 2025. The agency also will benefit from the federal infrastructure package.
“This is a critical time for our region’s transit system,” RTA Board Chairman Kirk Dillard said in a statement. “This rating upgrade reflects the RTA’s commitment to strong financial oversight and diligence in working toward improving the system while balancing fiscal realities as we continue to recover from the pandemic.”
Moody’s also raised the CTA’s $2.1 billion of sales tax backed bonds to A1 with a stable outlook from A2 and its $52 million of public building commission bonds to A2 from A3. Moody’s cited the state’s healthier fiscal condition in part for the building commission upgrade but the sales tax upgrade stems from the “resiliency in the tax base supporting the bonds following a rapid rebound in taxes after the drop in 2020.”
Early this week, S&P Global Ratings handed out either a positive outlook or rating upgrades for six seven of the state’s nine public universities it rates. Four are in investment grade territory, three are speculative grade.
The universities have about $1.9 billion of outstanding debt with the flagship accounting for $1.5 billion. Most of it is rated, S&P analyst Jessica Wood said.
“While the state of Illinois has had an inconsistent experience with its budget and performance, higher education appropriations have stabilized in the past couple of years, with funding distributed consistently,” Wood said. “We believe that the state’s improved budget position mitigates the risk of reduced appropriations for Illinois public universities. Instead, we expect to see stable-to-increasing appropriations and therefore, potentially improved financial performance for universities.”
The state’s new $46.5 billion general fund budget raised higher education appropriations by 5% or $248.5 million for universities and community colleges. The higher education budget totaled $2.24 billion with the 5% increase that the Pritzker administration said was the largest annual hike in two decades.
Illinois State University and the flagship University of Illinois are the only schools among the seven with ratings higher than the state’s BBB-plus rating.
“These universities, in our opinion, have demonstrated reduced reliance on state operating appropriations, more robust demand profiles, larger endowments, more manageable debt burdens, and greater financial independence, which all provide support to the ratings,” S&P said.
The lower-rated campuses continue to struggle with enrollment after several years of declines due to weakened demographics and decisions by potential students to go to out-of-state schools, although S&P said some are bouncing back.
S&P bumped the outlook on the University of Illinois’ A-plus rating to positive from stable.
S&P held Illinois State University steady at A-minus. It shifted the outlook to positive last December. “During the two-year outlook period, we could consider a positive rating action if the university stabilizes its enrollment and demand metrics, grows its balance sheet ratios, and maintains its solid operating performance, excluding non-recurring federal support,” S&P said.
Southern Illinois University was upgraded two notches to BBB-plus from BBB-minus and assigned a stable outlook based on the state’s improved fiscal picture and SIU’s stabilizing enrollment trend and the university’s solid operations despite the COVID-19 pandemic.
S&P lifted Governors State University to BBB with a stable outlook from BBB-minus citing the state upgrade and GSU’s own stronger fiscal profile underscored by recent surpluses.
S&P raised Northeastern Illinois University, Western Illinois University, and Eastern Illinois University all one notch to BB-plus from BB, citing the state’s upgrade.
Moody’s recently raised the ratings on five of the six state public universities it rates, delivering a second dose of good rating news for several campuses that saw ratings boosts late last year and early this year.
