Downgrade makes Ill. Moody’s lowest-rated state

Illinois had its general-obligation bond rating reduced by Moody’s Investors Service to A2 from A1, making it the company’s lowest-graded U.S. state.

The downgrade to the sixth-highest rating came after a legislative session that “took no steps to implement lasting solutions to its severe pension under-funding or to its chronic bill payment delays,” Moody’s said in a report. Illinois, it said, has “weak management practices.”

Moody’s revised its outlook on the debt to stable from negative, citing the state’s sovereign power over revenue and spending, and laws that establish the priority of payment for general-obligation bonds. The downgrade affects $32 billion of debt, according to the statement.

“Although the state has taken positive steps toward fiscal stability, swift bipartisan action to implement further cost reductions and reforms in the upcoming legislative session are needed to stabilize the budget,” Kelly Kraft, a spokeswoman for Governor Pat Quinn, said in a statement.

Illinois, the fifth-most-populous U.S. state, plans to sell $800 million in taxable and tax-exempt general-obligation bonds as soon as Jan. 11.