Illinois lawmakers adjourn, hanging transit out to dry
7 min read
Bloomberg News
The Illinois General Assembly passed a $55.2 billion budget but sent nothing to Gov. JB Pritzker on public transit before its legislative session ended this weekend, pushing Chicago-area transit agencies closer to the fiscal cliff.
The balanced budget includes legislation raising the state’s general obligation bond authorization by $875 million, to $82.66 billion.
The legislature abandoned an earlier attempt to
“I’m sure the transit agencies would prefer the situation be resolved sooner rather than later, but given the General Assembly did not act, the transit systems will have to go forward with the planning (for service cuts), and there are a number of hearings that need to be held before the cuts can be made,” said Maurice Scholten, president of the Taxpayers’ Federation of Illinois.
The federal government requires hearings be held before service cuts are implemented, and lawmakers may yet produce something during the veto session, he said.
“At that point the transit agencies can kind of pull an audible and incorporate those new revenues into their 2026 budgets,” he added. “And hopefully the plan would be at that point to avert the cuts.”
In a
“We need to address transit funding as fast as possible, and no doubt the legislators will be meeting over the course of the summer,” he said. “Our office will be present in those and be helping in any way that we’re asked.”
RTA Director of Communications Tina Fassett Smith told The Bond Buyer that at the RTA’s June 12 board meeting, the agency is scheduled to release its budget marks for 2026.
“It’s clear that many in both the House and Senate support transit, and our intention is to build on that shared support to identify the funding needed to avoid devastating cuts,” she said in a statement Sunday.
“In the coming weeks the RTA will work with the service boards on a regional budget that by law must only include funding we are confident the system will receive in 2026,” she added.
Michael Gillis, a spokesman for the Metra commuter rail service, said Metra won’t have a timeline for service cuts until it drafts its budget. Its pandemic relief funding is expected to run out in mid-2026.
“We will begin planning our 2026 budget and service levels based on the funding currently available, with hope and determination that additional support will be secured later this year,” Maggie Daly Skogsbakken, chief communications officer for the suburban bus service Pace, said in a statement.
Chicago Transit Authority spokesman Manny Gonzales shared a statement that said the CTA will continue to work with state lawmakers.
Moody’s Ratings in March revised the outlook to negative from stable on its A1 rating on the CTA’s outstanding senior lien sales tax bonds.
KBRA rates the CTA’s sales tax receipts revenue bonds AA and second lien sales tax receipts revenue bonds AA-minus; the outlook is stable. In April, KBRA revised the outlook to negative from stable on the CTA’s Series 2015 and 2016A Transportation Infrastructure Finance and Innovation Act loan bonds.
“With legislators failing to agree on a revenue package during the spring session, KBRA will closely monitor funding negotiations over the coming months, as well as any announced CTA service reductions,” said Douglas Kilcommons, managing director, public finance at KBRA.
“Over the longer term, CTA’s inability to replace expiring federal funding and lost farebox revenues with other, stable funding sources will lead to growing out-year budget gaps, especially as operating costs associated with labor, energy and security services are projected to increase,” he added.
Kilcommons highlighted the CTA’s $539 million 2026 budget deficit, low liquidity, lack of operating flexibility, and the potential for service cuts as top concerns at the moment.
He added that recent reports of a $2.15 billion increase in the budgeted cost of the CTA’s Red Line Extension — which would bring the total project cost to $5.75 billion from $3.6 billion, and which the CTA would be on the hook for — has implications for its debt.
“Use of sales tax revenue bonds to fund such incremental costs — assuming no favorable legislative revisions to the sales tax pledge — could further pressure already strained CTA operating revenues, dilute sales tax revenue bond debt service coverage, and limit bonding capacity for other essential capital improvements,” he said.
Matthew Butler, vice president-senior credit officer at Moody’s, said the clock has not run out yet.
“The state can still act at some point in the year, though there is a larger vote hurdle to overcome,” he said. “The more time that passes without state action, the higher the risk of deterioration in CTA liquidity and other key financial metrics.”
The key credit issue is funding, Butler said. “We do not expect the CTA can close its gap through spending reductions and fare increases,” he added. “Action by the state of Illinois would be consistent with transit systems across the U.S. benefiting from expanded state support as they have spent their federal relief funds.”
S&P Global Ratings rates the agency’s sales tax receipts revenue bonds AA. In November, it lowered the outlook to negative from stable on the CTA’s A-plus-rated TIFIA loan bonds, Series 2006, given a significant budget gap.
“We will be monitoring discussions within the RTA region and at the state level regarding progress towards a funding solution for transit,” said Andrew Brederson, director at S&P.
Brederson said S&P is keeping an eye on the CTA’s budget gaps for 2026 and beyond; its $7 billion, five-year capital program that includes $1.6 billion in planned CTA bonds; thin liquidity; and a large unfunded pension liability.
The budget and capital plan that passed the General Assembly includes four bills: a spending bill,
As part of the GO bond increase, the bond authorization raises the pension obligation acceleration bond authorization to $2.2 billion from $2 billion.
The bond bill includes no new authority for retiring or refinancing outstanding debt. But there is a $740 million increase for capital projects through the Build Illinois Bonds program.
Also part of the budget that passed: a change to corporate tax law from the Joyce Rule to the Finnigan Rule. Under the Joyce Rule, the subsidiaries of corporations with multiple components operating in a state would only have to file the joint tax return if that particular subsidiary has a nexus in Illinois.
Under the Finnigan Rule, if one of the subsidiaries under common corporate ownership has a nexus in Illinois, they’re all deemed to collectively have nexus.
The Taxpayers’ Federation opposed the change. Scholten said the state’s corporate income tax system “has to be competitive with other states.” And one factor that drives corporate decision-making around location is the corporate tax structure, he said. The state also has to consider the impact on businesses that are already in Illinois and may leave.
The Illinois Chamber of Commerce said in a statement that it had been encouraged by Pritzker’s executive budget. The General Assembly’s final budget is “a different story,” it said, tallying tax increases at $350 million.
“This breaks the commitment to avoid new taxes and sends the wrong message to employers across the state,” the chamber said.
Absent from the final budget was funding for a new stadium for the National Football League’s Chicago Bears. In response to a question about the Bears, Pritzker hinted on Sunday that he would like to see more local governments in Illinois pursue economic development along the lines of
“I’m quite interested to make sure that — not for the Bears, but for developments all across the state of Illinois — that we have available things like… STAR bonds,” Pritzker said. “Which is a great idea when implemented properly, and it is being implemented properly in Marion, Illinois, right now. But we think that’s something that should happen across the state.”
As for the use of some one-time fixes to close the budget gap, Pritzker said, “We need more stability out of Washington, D.C. … We would not have suffered this problem had we not had the Trump Slump affecting us — the $500 million of reduced revenues to the state of Illinois as a result of what Donald Trump has done to a booming economy.”
S&P and Fitch Ratings assign an A-minus rating to Illinois’ GO bonds; the outlook is stable. Moody’s rates the bonds A3 with a positive outlook.
