Illinois: Worst Credit Rating in the Nation

Believe the real news about this announce­ment is two things.

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.

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