A major credit rating agency this week downgraded the state’s general obligation bond rating, warning that the rating could drop further if nothing is done to address Illinois’ massive deficit and multi-billion-dollar bill backlog.

Despite recent action by state lawmakers to ward off the possible downgrade—passing a pension reform measure to show Illinois is working to get its fiscal house in order—Fitch Ratings downgraded the state’s rating while maintaining a continued Rating Watch Negative. On March 26, Standard & Poor placed Illinois on a negative credit watch, and Moody’s Investors Service has also affirmed its negative outlook.

While commending the pension reforms, Fitch Ratings focused more on the overall fiscal mismanagement of the state under Governor Pat Quinn and legislative Democrats. In issuing the downgrade, the rating agency said, “The rating downgrade reflects the magnitude and persistent nature of the state’s fiscal problems and the likelihood that the budget to be enacted for fiscal year (FY) 2011 will not sufficiently address either the annual operating deficit or accumulated liabilities.”

Fitch highlighted Quinn’s plan to borrow nearly $5 billion more than the state will take in, and defer payments to state vendors, in order to avoid difficult budget decisions.

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