(Bloomberg) -- Billionaire Governor J.B. Pritzker vaulted Illinois into a higher tier of credit ratings for the first time since 2016 after working to improve the state’s beleaguered finances.

On Thursday, S&P Global Ratings raised Illinois’ general-obligation debt by one notch to A-, shedding its position as the only US state without an A-level rating. The outlook on the bonds is stable after the upgrade, which impacts about $26.5 billion of general-obligation debt, according to S&P. 

The move builds on the state’s ratings revival over the past two years. During an interview at Bloomberg’s Chicago office, Governor J.B. Pritzker touted the steps his administration has taken to alleviate the fiscal woes: eliminating the bill backlog, paying down pension debt and passing budgets on time.

“In Illinois, we have to diligently work every year to make sure that our reputation improves but it only improves if you’re actually making progress,” Pritzker said. “You have to do it on crime, and you got to do it on pensions and you got to do it on a budget.”

The rating lift comes about a week after the Democratic governor proposed a $49.6 billion spending plan for the year that starts July 1. His proposed budget pays $138 million into the state’s rainy-day fund and contributes about $9.8 billion to the state’s massively underfunded pension funds. 

Read more: Illinois Governor Proposes $49.6 Billion Budget for Fiscal 2024

In 2019, the year Pritzker took office, Illinois had $8 billion of unpaid bills and about $60,000 in its rainy day fund, according to documents from the governor’s office. The state’s credit ratings were only one level above junk.

“Our No. 1 priority is balancing the budget, paying down debt,” Pritzker said during an interview on Bloomberg Television. “We’ve invested in paying down our debt and that’s something we will continue to do.” 

Pritzker said he has no plan to raise taxes, and that he’s making investments to help residents and keep people from leaving the state. The comments came after some of Chicago’s top CEOs proposed a personal income surcharge of 0.5% and a comparable increase in corporate taxes for 10 years to help accelerate pensions funding, a move they say would boost tax revenues by $2.9 billion a year.

“You’ve got to think about where we started, where we are and where we’re intending to go,” Pritzker said. “And just recognize that fixing the fiscal ship has gotten us to a place where we can address these problems. And it’s my intention to make sure that when we do all that, as we are, have fixed the fiscal ship, that we also lower taxes.”

The spread on Illinois’s 10-year bonds is about 1.5 percentage points above the AAA benchmark, according to data compiled by Bloomberg. 

The ratings upgrade, “that affirms what the market has recognized, that the state’s political leadership has shown a willingness to address the accumulated financial problems,” said Patrick Luby, a CreditSights strategist. “However, the future is not without challenges, and Illinois’ composite rating remains the lowest among all of the states. Investors should rightly continue to expect spreads for the state’s GOs to be wider than its peers.”

Thursday’s S&P lift follows a series of rating hikes for Illinois. Moody’s Investors Service and S&P both raised the state in 2021 for the first time in two decades. Fitch Ratings raised Illinois’s rating last year. Revenue growth, rebuilding reserves and more payments toward unfunded liabilities including pensions have bolstered the state’s credit.

The upgrade “reflects our view that Illinois’ commitment and execution to strengthen its budgetary flexibility and stability, supported by accelerating repayment of its liabilities, rebuilding its budget stabilization fund to decade highs; and a slowing of statutory pension funding growth, will likely continue during the outlook period,” Geoff Buswick, an S&P credit analyst, said in a statement.

Illinois’s rating is still the lowest among its peers when looking at multiple rating companies, largely because of its pension debt. The state’s four retirement systems have nearly $140 billion of unfunded liabilities.

Pritzker acknowledged that there is more to be done. 

“We have work to do,” Pritzker said. “You have to work at it every year though. This isn’t a one silver bullet is going to solve all the problems. That does not happen.”

--With assistance from Martin Z. Braun, Skylar Woodhouse, Maxwell Adler and Romaine Bostick.

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