S&P removes Illinois from credit watch with budget in place

CHICAGO (AP) - A credit ratings agency has removed Illinois from a credit watch since legislators approved a budget and ended a more than two-year impasse.

S&P Global Ratings said Wednesday the outlook on debt ratings is stable.

Illinois has the lowest credit rating of any state and agencies had warned of another downgrade to "junk" status if lawmakers didn't approve a budget. The stalemate between Republican Gov. Bruce Rauner and the Democrat-controlled Legislature began in 2015. This month, legislators approved a budget with an income tax increase over Rauner's vetoes.

S&P says the odds of Illinois' credit falling to below investment grade in the next year has "substantially diminished," but Illinois will "suffer an extended fiscal hangover" from the stalemate.

However, Moody's Investors Service has indicated it might cut Illinois' rate regardless of the budget.