SALON

Friday, Jan 11, 2013 9:00 PM UTC

Rating agency sours on Illinois’ financial outlook

By

Topics: From the Wires,

SPRINGFIELD, Ill. (AP) — A major credit rating agency has soured on the economic forecast for Illinois after another failed attempt this week to rectify the $96 billion pension system deficit.

Fitch Ratings announced Friday that it has relabeled Illinois’ financial outlook to “negative” from “stable.”

The outlook does not affect Fitch’s opinion of the state’s credit worthiness, still listed as “A.” That’s two steps below the grade for the best-quality borrowers — sound, but reflective of a climate where state finances are vulnerable to economic changes.

The announcement serves as an advance warning to Illinois that a downgrade could be on the horizon unless it resolves the gaping difference between its pension system’s assets and what it will eventually owe state employee retirees.

“It’s important that our bond-rating agencies give us as much time as possible in order to stabilize the pension system,” Gov. Pat Quinn told reporters Friday at a stop Friday in Bedford Park, about 14 miles southwest of Chicago.

Now, the Democrat and former high school distance runner compares the pension quest to a marathon.

Quinn had declared a pension-reform deadline of Jan. 9, the end of the last legislative term, anticipating negative responses from credit agencies. He said that deadline was set because Fitch and other agencies were “poised to take a look at us and we want to tell our legislators this is not a time to run in place. This is time to get the job done for the people back home.”

A downgrade from “A” could mean a higher interest rate to borrow money. The state typically borrows money for big items such as construction projects by selling bonds backed by promised future tax revenue. But decades of underfunding the pension system means that to catch up, Illinois must put up nearly one-third of its general revenue annually, putting a squeeze on money for services such as education and health care.

“Failure to enact pension reforms will eventually bring Illinois to its financial breaking point, and it will be worse than any fiscal calamity we have seen thus far in this state,” Republican Treasurer Dan Rutherford said in a statement.

The latest attempt at pension repair fizzled in the final hours of the legislative session on Tuesday. The plan would have required larger contributions from state employees and reduced eventual retirement benefits, but top House lawmakers had agreed to temporarily set aside the Republican-opposed idea of shifting the employers’ portion of contributions for teachers to local school districts.

Fitch noted that the negative outlook could “be resolved after an assessment of the extent to which the state takes action within the next six months that limits the impact of pension payments on the budget.”

Fitch is one of three agencies that monitor state finances and grades ability to repay debt, and its change in outlook matches the “negative” labels the other two — Moody’s Investors Service and Standard & Poor’s — laid on the state last year.

___

Contact John O’Connor at https://www.twitter.com/apoconnor

___

Online

Fitch Ratings: http://tinyurl.com/adcwwe2

More By John O'connor.

Next Article

Related Stories

More Related Stories

Featured Slide Shows

The week in 10 pics

close X
  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11
  • Lisa Montgomery embraces her nephew Thursday after a tornado tore apart her home in Cleburne, Texas. The twister killed six people and destroyed entire swaths of the North Texas town.
    Credit: AP/LM Otero

  • Jack McMahon, the defense attorney for abortion doctor Kermit Gosnell, speaks outside the Criminal Justice Center in Philadelphia Tuesday. His client was convicted of killing three babies in his clinic, and will serve multiple life sentences.
    Credit: AP/Matt Rourke

  • A photo taken Monday captures Vice President Joe Biden's response to a Milwaukee second-grader's innovative proposal to end America's epidemic of gun violence. This guy!
    Credit: AP/Jenny Aicher

  • Sen. Rand Paul, R-Ky., flanked by a grouper-eyed Michele Bachmann, addresses the IRS' admission that it targeted Tea Party groups in advance of the 2012 election. In an op-ed for CNN Thursday, the Kentucky senator slammed the president for his faux outrage.
    Credit: AP/Molly Riley

  • Ousted IRS chief Steven Miller is sworn in on Capitol Hill Friday. Miller testified before the House Ways and Means Committee on the extra scrutiny the agency gave conservative groups applying for tax-exempt status.
    Credit: AP/J. Scott Applewhite

  • Attorney General Eric Holder pauses as he testifies on Capitol Hill before the House Judiciary Committee Wednesday. Holder is under fire, among other things, for the Justice Department's gathering of phone records at the Associated Press.
    Credit: AP/Carolyn Kaster

  • O.J. Simpson sits during an evidentiary hearing at Clark County District Court in Las Vegas, Nev., Thursday. Simpson, who is currently serving a nine-to-33-year sentence in state prison for armed robbery and kidnapping, is using a writ of habeas corpus to seek a new trial.
    Credit: AP/Las Vegas Review-Journal/Jeff Scheid

  • Major Tom to ground control: On Sunday astronaut Chris Hadfield recorded the first music video from space, a cover of David Bowie's "Space Oddity."
    Credit: AP/NASA/Chris Hadfield

  • When it rains it pours. President Barack Obama speaks during a news conference Thursday with Turkish Prime Minister Recep Tayyip Erdogan, inexplicably inspiring an #umbrellagate Twitter meme.
    Credit: AP/Jacquelyn Martin

  • A smoke plume rises high above a road block at the intersection of County A and Ross Road east of Solon Springs, Wis., Tuesday. No injuries were reported, but the the wildfire caused evacuations across northwestern Wisconsin.
    Credit: AP/The Duluth News-Tribune/Clint Austin

  • Recent Slide Shows

  • Share on Twitter
  • Share on Facebook
  • Thumbnails
  • Fullscreen
  • 1 of 11

Related Videos

Comments

 0 Comments

Comment Preview

Your name will appear as username

You may use these HTML tags and attributes: <a href=""> <b> <em> <strong> <i> <blockquote>

follow salon

Most Read

Popular on Reddit

links from salon.com

From Around the Web

Presented by Scribol
listener_new_rect The Listener: So long, Sookie Stackhouse

Recommendations