Unresolved pension crisis contributes to Illinois credit rating downgrade
After the Illinois legislature adjourned without passing pension reform, the state’s credit rating was downgraded and given a negative outlook.
Fitch Ratings Service dropped Illinois’ rating on its $27.5 billion worth of outstanding general obligation bonds from “A” to “A-.”
Fitch also downgraded $438 million in state tax-supported sports facilities bonds, issued in 2001 to support the Illinois Sports Facilities Authority, from “A-“ to “BBB+.” The bonds rely on state appropriations for repayment.
Fitch cited the “ongoing inability of the state to address its large and growing unfunded pension liability” as a key reason for the downgrade.
The state legislature adjourned Friday, May 31, 2013 without passing pension reform.
Fitch has a negative outlook on the future for Illinois credit, saying the state needs “to find a more permanent solution to the structural mismatch between spending and revenues, a prospect that appears more elusive following the inaction on pension reform, given the high profile support accorded that issue.” High long-term liabilities and continuing to defer payments on debt are also key factors in the downgrade.
Governor Pat Quinn said if he could fix the issue with an executive order, he would.
State Senator Bill Brady, who was Quinn’s opponent in the last election, said the governor needs to show leadership by calling for a special session of the legislature to solve the pension crisis.
Brady is considering another run for governor, and said he will announce by the end of June whether he will run again.