CHICAGO (Reuters) - Illinois' budget crisis dragged down the credit ratings of six state public universities and Chicago's community college system on Thursday in a slew of downgrades by S&P Global Ratings.
The rating for the University of Illinois, the state's largest system, fell one notch to A after S&P determined it could only be three notches above the state's BBB rating. S&P also warned of a further downgrade if the state failed to fund the system beyond a stopgap amount of $356 million approved last June.
Illinois is limping toward the end of its second straight fiscal year without a complete budget due to a political stalemate between its Republican governor and Democrats who control the legislature.
The impasse has resulted in only partial appropriations for state universities, forcing most of them to tap reserves and cut expenses.
"Given the budget impasse of fiscal 2016, ongoing fiscal 2017 budget impasse, and the absence of an agreement among elected leaders, it is our opinion that state appropriations to public universities in Illinois will remain uncertain in the intermediate term," S&P said in a report.
Southern Illinois University's credit rating was dropped into the junk level of BB from BBB, while ratings for Northeastern Illinois and for Eastern Illinois universities fell deeper into junk, at B, from BB. Western Illinois University's rating was cut to BB-minus from BBB-minus and Governors State University's rating was downgraded to BB from BB-plus.
S&P also lowered the rating four notches to BBB from A-plus for the City Colleges of Chicago, which operates seven community colleges.
The ratings were placed on a watch list for a potential subsequent downgrades.
S&P affirmed an A rating for Illinois State University on Thursday, but placed the school on the same watch list as the others.
Illinois' record-breaking budget impasse has been hard on the universities, which have been hit with rounds of bond rating downgrades over the past two years.
Earlier this week, Moody's Investors Service placed seven Illinois universities on review for possible rating downgrades affecting $2.2 billion of debt.
(Reporting by Karen Pierog; Editing by Richard Chang)