MORNINGSTAR

S&P Downgrade Brings Illinois Closer to Junk--Update

Illinois also would have to make millions of dollars in termination payments on existing interest-rate swap contracts, according to S&P. Those penalties would be about $10 million in the event of a downgrade to junk by one rating firm, would reach $19 million if two firms gave the state a junk rating and could reach $108 million in the event of further downgrades.

"By letting the state get downgraded, Illinois's government is only making its own budget problems worse," said Matt Fabian, a partner at Municipal Market Analytics

Analysts for all three ratings firms have said that Illinois has significant economic strengths and that its deteriorating credit is in large part a result of political gridlock.