Last Updated:October 21 @ 05:07 pm

Illinois credit rating worst in the nation after downgrade

By Chicago Tribune

SPRINGFIELD - Illinois fell to the bottom of all 50 states in the rankings of a major credit ratings agency Friday following the failure of Gov. Pat Quinn and lawmakers to fix the state's hemorrhaging pension system during this month's lame-duck session.

Standard & Poor's Ratings Service downgraded Illinois in what is the latest fallout over the $96.8 billion debt to five state pension systems. The New York firm's ranking signaled that taxpayers may pay tens of millions of dollars more in interest when the state borrows money for roads and other projects.

"It's absolutely bad news for taxpayers," said Dan Rutherford, the Republican state treasurer.

Illinois received its bottom-of-the-pack ranking when it fell from an A rating to A-minus. That's the same rating as California, but California has a positive outlook. Illinois' fragile overall financial status netted it a negative outlook, putting it behind California overall. The ratings came out now because Illinois plans to issue $500 million in bonds Wednesday.

Exactly how much Illinois' credit rating slide ultimately will cost taxpayers is unknown until demand for the state's bonds is measured in the markets. But Rutherford estimated the state will pay $95 million more in interest than if Illinois had a AAA rating, which is much higher.

Even before the downgrade was announced, Quinn said in Chicago that the "pressure is higher than ever" to solve the pension problem because "credit rating agencies are screaming at the top of their voice" for final action.

The Democratic governor and lawmakers couldn't cut a pension deal despite his deadline for the outgoing Legislature to act before the new General Assembly was sworn in Jan. 9.

On Friday, Quinn called for lawmakers to take up legislation sponsored by Senate President John Cullerton, D-Chicago, that combines two rival pension plans emerging from the House and Senate. Both rein in costs by reducing benefits, an action unions have argued is unconstitutional.

Cullerton spokeswoman Rikeesha Phelon said the ratings agencies are "confirming what we all recognize. It's time for action on pensions."

House Republican leader Tom Cross of Oswego maintained that Friday's downgrade underscores the "gravity of Illinois' fiscal crisis." Moody's already ranks Illinois 50th among the states, and Fitch ranks the state 49th but warns of a negative watch, Rutherford said.

One other ominous point in the Standard & Poor's report is that inaction could lead to downgrading Illinois to BBB, an "unusual" low rating for any state. The agency noted that a "lack of action on pension reform and upcoming budget challenges could result in further credit deterioration."

"Most states will build reserves when the economy is performing well, and that typically provides a cushion when the revenues deteriorate," said Robin Prunty, the S&P analyst who heads the agency's state ratings group. "But Illinois has never really carried or accumulated any kind of budgetary reserves."

On top of the pension problem, Illinois faces more grim budget duties. The state has made major cuts in school funding in two straight budgets, and the Quinn administration predicted more cuts are on the way. In addition, a 67 percent increase in the income tax rate that lawmakers imposed in 2011 starts to decline in 2015. And the state has billions in unpaid bills.

rlong@tribune.com

mcgarcia@tribune.com

Twitter @RayLong

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Illinois credit rating worst in the nation after downgrade, 9.1 out of 10 based on 13 ratings





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5 Comments

  1. nickster99Comment by nickster99
    January 28, 2013 @ 11:41 am

    Illinois is a fiscal DUNG HEAP. I am sad to say I live in it. These politicians in this state couldnt get it right if their lives depended on it. They love to play kick the can! All they care about is their own skin. What does anyone expect when the states attorney is the daughter of the crookedest one of them all. The house speaker Mr. Madigan! I am seriously looking at Indiana, if I could sell my home! It is only 12 miles down the road!

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    • aretiredgiComment by aretiredgi
      January 28, 2013 @ 8:37 pm

      And just yesterday our Dunderhead Governor signed a bill allowing undocumented aliens (same-o same-o ILLEGAL) the ability to obtain a drivers license.

      If I do something ILLEGAL, I get arrested.

      Keep up the good work Springfield, ya managed to take the DUMBAZZ title away from New Jersey.

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  2. wallybluComment by wallyblu
    January 28, 2013 @ 2:14 pm

    Just make one little change, only residents of the state can collect state retirement. Most of the state retirees that can have moved out of the state.

    Illinois used to be a nice place to live before the Chicago machine took over the whole state. Look closely, this is the future of the United States of America.

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  3. middlegroundComment by middleground
    January 28, 2013 @ 3:39 pm

    I find myself amazed that this country has voters who actually think education and other public employment jobs will be improved by paying people to retire early and with exponentially increasing benefits. Think it through, a teacher who retires at 50 teaches no students and has probably moved to a warmer climate. Eventually you will be paying more to those who are no longer teaching, than you do to those still working. So where can the system make cuts? Basically, it can only reeduce the number who are actually working on the job and that does not improve public education.

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  4. trishywishyComment by trishywishy
    January 29, 2013 @ 6:49 am

    They’re waiting for their bailout from the federal government. Hopefully they won’t get it. Can you imagine what it would look like when the people of these states start rioting like they are in Greece and the rest of Europe. Maybe the rest of us should just sit back and watch the morons who voted for these morons, burn it to the ground, then they could consider themselves fundamentally transformed, and start all over again. But liberal progressives evidently don’t retain much, or they wouldn’t be in this position in the first place.

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