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Article posted: 1/11/2013 4:35 PM

Fitch downgrades Illinois outlook to 'negative'

Illinois Gov. Pat Quinn speaks to reporters Wednesday on pension reform legislation.

Illinois Gov. Pat Quinn speaks to reporters Wednesday on pension reform legislation.

 

Associated Press

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By Bloomberg News

Illinois faces a possible downgrade by Fitch Ratings on $26.2 billion of general-obligation debt after lawmakers this week failed to repair the nation's worst- funded state retirement system.

Fitch today changed its outlook on the state to negative from stable. The company rates Illinois A, its sixth-highest grade. The state has unfunded retirement obligations of about $95 billion, according to the company.

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The outlook "reflects the ongoing inability of the state to address its large and growing unfunded pension liability," Karen Krop, a Fitch analyst, wrote in a report released today.

The state had the weakest pension system in the U.S., with 39 percent funding for five major groups of public employees, according to the Civic Federation, a Chicago-based nonprofit research group.

"The burden of large unfunded pension liabilities and growing annual pension expenses is unsustainable," Krop said.

Moody's Investors Service and Standard & Poor's also grade the state their sixth-highest level.

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