The pension crisis deepened this week after two downgrades of Illinois' credit ratings. First, Fitch Ratings lowered to A-minus the grade it assigns to Illinois debt. Then, Moody’s Investors Services cut the state's rating on its $27 billion of outstanding general obligation bonds, from A3 to A2, and also downgraded its rating of Illinois' $5 billion in related debt.
Moody’s cited “political paralysis” in making the ratings downgrade, saying it “shows not only the magnitude of Illinois’ unfunded benefit liabilities, but also the legal and political hurdles to legislation that would make pensions more manageable long term.” The firm said it assumes that Illinois leaders “will not take action to reduce the state’s pension liabilities any time soon.” Illinois is dead last among the states in terms of unfunded pension liabilities, after years of not socking away enough money to cover what it owes its retirees.
Some state legislators are also skeptical that real action will happen June 19, the date the governor says he wants the General Assembly back in session.
“He tried that last year, and it didn’t work. I’d suggest he seriously, seriously consider the drawing board before he invites us back to Springfield. It’s a risky play for him unless he’s pretty sure he’s got a solid agreement and therefore some solid votes,” House majority leader Barbara Flynn Currie (D) told the Chicago Sun-Times Friday.
The paralysis reflects “the unwillingness” of state leaders to seriously confront reform, especially because that would mean disappointing or angering public-sector unions, says Lawrence Msall, president of the Civic Federation, an advocacy and research organization in Chicago.