Editor's note: Your Probate Shark wonders what effect the failed court system had upon Fitch's decision? Lucius Verenus, Schoolmaster, ProbateSharks.com
Illinois credit rating lowered after pension reform failure
(Tribune illustration)
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SPRINGFIELD --- A major investor ratings service further lowered Illinois' worst-in-the-nation credit rating today following lawmakers' inability to agree on money-saving reforms to the public employee pension system.
Fitch Ratings dropped Illinois bonds from an "A" rating to "A-" after lawmakers could not pass changes to a public pension system approaching $100 billion in debt.
"Fitch believes that the burden of large unfunded pension liabilities and growing annual pension expenses is unsustainable, and that failure to achieve reform measures despite the substantial focus on this topic exacerbates concern about management's willingness and ability to address the state's numerous fiscal challenges," the ratings service wrote.
Separately, Moody's Investor Service had warned about the potential downgrade Friday, the final day of the legislature's spring session. Lawmakers went home for the summer unable to agree on pension reform. House Speaker Michael Madigan and Senate President John Cullerton, both Chicago Democrats, had passed dueling versions of pension reform based on different approaches.
Democratic Gov. Pat Quinn said he plans to meet with Madigan and Cullerton on Tuesday and called the downgrade "no surprise."
"As I have repeatedly made clear to the General Assembly, this will continue to happen until legislators pass a comprehensive pension reform bill, and put it on my desk," Quinn said in a statement. “Every time the General Assembly misses the deadline, Illinois’ credit rating is downgraded, which hurts our economy, wastes taxpayer dollars and shortchanges the education of our children."
Fitch also gave Illinois a “Negative Outlook” because it lacks solutions to its multibillion-dollar backlog of old bills. The state just passed a $35 billion-plus operating budget, but the state comptroller predicted the backlog of older, unpaid bills could hit $7 billion within a couple of month.
“The Negative Outlook reflects the challenges faced by the state in finding comprehensive solutions not only to reducing its unfunded pension liabilities, but also to maintaining budgetary balance,” Fitch said.
It noted the state’s temporary 67 percent increase in the personal tax rate is slated to start dropping off in 2015, and the state will be “faced with a significant budget balancing decision to make permanent the tax increases, make severe expense reductions, or identify new revenues.”
Fitch Ratings dropped Illinois bonds from an "A" rating to "A-" after lawmakers could not pass changes to a public pension system approaching $100 billion in debt.
"Fitch believes that the burden of large unfunded pension liabilities and growing annual pension expenses is unsustainable, and that failure to achieve reform measures despite the substantial focus on this topic exacerbates concern about management's willingness and ability to address the state's numerous fiscal challenges," the ratings service wrote.
Separately, Moody's Investor Service had warned about the potential downgrade Friday, the final day of the legislature's spring session. Lawmakers went home for the summer unable to agree on pension reform. House Speaker Michael Madigan and Senate President John Cullerton, both Chicago Democrats, had passed dueling versions of pension reform based on different approaches.
Democratic Gov. Pat Quinn said he plans to meet with Madigan and Cullerton on Tuesday and called the downgrade "no surprise."
"As I have repeatedly made clear to the General Assembly, this will continue to happen until legislators pass a comprehensive pension reform bill, and put it on my desk," Quinn said in a statement. “Every time the General Assembly misses the deadline, Illinois’ credit rating is downgraded, which hurts our economy, wastes taxpayer dollars and shortchanges the education of our children."
Fitch also gave Illinois a “Negative Outlook” because it lacks solutions to its multibillion-dollar backlog of old bills. The state just passed a $35 billion-plus operating budget, but the state comptroller predicted the backlog of older, unpaid bills could hit $7 billion within a couple of month.
“The Negative Outlook reflects the challenges faced by the state in finding comprehensive solutions not only to reducing its unfunded pension liabilities, but also to maintaining budgetary balance,” Fitch said.
It noted the state’s temporary 67 percent increase in the personal tax rate is slated to start dropping off in 2015, and the state will be “faced with a significant budget balancing decision to make permanent the tax increases, make severe expense reductions, or identify new revenues.”
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