Its residents had better hope not.
A question no one’s asked out loud with regard to the ongoing Illinois state budget negotiations is what happens if—or when—the state becomes unable or unwilling to pay its bills a few years down the road.
It’s clearly on the minds of investors who own Illinois debt: Theprice of the state’s bonds has been falling and the rating agencies recently downgraded its debt to just one step above junk. Both of these are proximate responses to the state’s budget impasse, which is entering its third year.
But another reason for the growing wariness of investors toward Illinois debt emanates from developments in Puerto Rico, which asked for and received legislation from the federal government to assist with its debt burden.