Illinois credit rating lowered over pensions
August 29, 2012 (SPRINGFIELD, Ill.) (WLS) -- Standard and Poor's ratings service lowered the state of Illinois' rating a notch on Wednesday, citing continuing pension problems.
Employees worked the computers and phones at Performance Trust in downtown Chicago on Wednesday. They're talking to some customers who are facing losses as a result of Standard and Poor's lowering Illinois' bond rating.
Lower ratings can raise the interest rate Illinois must pay when borrowing money, and it increases the debt burden on state residents.
The downgrade, from A+ to A, leaves Illinois with the nation's second-lowest rating from S&P. California is rated A-, but it has earned a "positive outlook" from the firm.
Moody's rating service has also warned that it may lower Illinois' rating.
"The aggravating thing is we saw it coming. Don't have the political will. Cost taxpayers," Brian Battle, Performance Trust, said.
The move was expected after lawmakers failed to come up with a pension reform plan at a special session in Springfield earlier this month. Governor Pat Quinn issued a statement chastising lawmakers.
"We must put politics aside. Pointing fingers will not resolve this problem. Inaction on pension reform is unacceptable and unfair to our children," Gov. Quinn said. "We must address the unfunded pension liability and we can only do it together. I am inviting the four legislative leaders to a meeting in early September to work on pension reform. Illinois cannot move forward without it."
The governor says the fifth most populous state has unfunded pension liability of $83 billion, which is the worst in the country. And the lowered bond rating means it will cost the state nearly one and a half percentage points more than most other states.
Financial experts say the problem can be fixed mathematically --but it will take political will.
"What we have to do is get the General Assembly, lock them in a room and turn the air conditioning off," Battle said.
The debt burden on the average Illinois family to cover pension obligations is now estimated at $56,000. Even if the legislature solves the issue, it would likely take another year before Standard and Poors and other agencies would raise the state's rating.
illinois news, john garcia
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