S&P lowers Illinois credit rating over pensions
SPRINGFIELD — Continuing pension problems and government gridlock earned Illinois another reduction in its credit rating Wednesday.
Standard & Poor’s Ratings Services said it lowered Illinois’ rating a notch because of “weak pension funding levels and lack of action on reform measures.” The firm also said the financial outlook for Illinois is negative, in part because the state’s temporary income tax is scheduled to expire in 2015.
Lower ratings can raise the interest rate Illinois must pay when borrowing money.
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.
Gov. Pat Quinn said in a statement that the downgrade is no surprise but still serves as evidence that state leaders must fix public pension systems. Illinois’ retirement systems have a huge gap between the money available and what they will eventually pay out in pensions. The roughly $85 billion shortfall is the largest in the country.
Quinn called legislators into special session earlier this month, but they couldn’t agree on what to do, largely because of a dispute about whether to transfer some pension costs to school districts. The Chicago Democrat said he’s asking legislative leaders to meet with him early next month to resume talks.
“The only thing standing between Illinois and comprehensive pension reform is politics,” Quinn said. “We must put politics aside.”
Trying to close the gap costs the state more money each year, leaving less for other government needs. Pension payments this year will make up 20 percent of state government’s general spending, compared with 13 percent three years ago.