Illinois moved another step back from the ratings brink Thursday afternoon, as Moody’s Investors Service revised the outlook to stable from negative on its Baa3 rating, which was affirmed.

The action gives Illinois a bit of space above speculative-grade status, though the rating itself remains at the lowest investment grade.

S&P Global Ratings on March 9 moved the outlook to stable on its BBB-minus rating; Fitch Ratings remains at BBB-minus with a negative outlook.

Moody’s cited “the state’s financial performance through the pandemic, in combination with increased levels of federal support that will moderate near-term fiscal and economic pressure.”

Investors gave their stamp of approval to Illinois on March 16, when the state priced $1.26 billion of general obligation bonds at its lowest spread to triple-A benchmarks since 2014.

“State and local government funds expected under the latest federal aid package may help the state repay deficit financing loans, support its financially pressured local governments and spur employment, income and tax revenue growth,” Moody’s said. “While credit risks raised by the pandemic during the past year are receding, the longer-term challenges associated with the state’s very large unfunded post-employment liabilities remain.”

Moody’s new stable outlook also applies to Build Illinois sales tax revenue bonds, which were affirmed at Baa3, and Metropolitan Pier and Exposition Authority bonds, which were affirmed at Ba1.

The state’s total debt under these three programs is about $36 billion, according to Moody’s, including GO loans from the Federal Reserve’s Municipal Liquidity
Facility.