1) Illinois is about to issue $500 million in new bonds as part of the budget plans of Democratic Governor Pat Quinn — the lamest duck governor in the country. This news will only effect the sale of them.
2) The Land of Lincoln barely dodged the bullet from dropping from an “A-level rated bond” to a “B-level rated bond.”
Illinois may have Chicago acting as a jobs magnet to puff up its numbers, but its relationship with its public employee unions is the dark mirror of what Wisconsin has done since the enactment of Act 10. Its budget is in chaos and a live-action train wreck for all the world to see.
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 rating firm’s ranking signaled 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 within days.
Exactly how much Illinois’ credit-rating slide ultimately will cost taxpayers is unknown until the 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 revealed, Quinn said in Chicago 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.
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 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.”
Not surprisingly, they has been called to deal with pensions a multitude of times by both Democrats and Republicans in Illinois. Also not surprisingly, the state’s public employee unions have claimed any attempts to change the current pension system is unconstitutional and would be fought tooth and nail.
Illinois has created this hell, it is now time for them to burn in it.