* From Fitch Ratings…
Fitch views the passage of pension reform legislation in Illinois yesterday as a positive indication of the state’s willingness to take action on this complicated issue after many failed attempts. Fitch has stated that pension reform that enhances the funding levels of the pension systems and controls the growing impact of pension payments on the budget is necessary to stabilize the credit, and will analyze the reform to determine the extent to which it does so. Supporters have stated that the reforms will save $160 billion over the next 30 years; however, the actual impact of the reform will not be entirely known until an actuarial study has been completed. Further, legal protection of pension benefits is particularly strong in Illinois and Fitch believes legal challenge to the reform is likely.
Fitch’s rating on Illinois, at ‘A-’, with a Negative Rating Outlook, is the lowest for a U.S. state. This reflects a record of the state’s unwillingness to address its numerous fiscal challenges, including but not limited to the large and growing unfunded pension liability. In addition to action on pensions, maintenance of the rating will require timely action on a more permanent budget solution to the structural mismatch between spending and revenues in advance of the expiration of temporary tax increases. Temporary increases in both the personal and corporate income taxes that have been supporting the budget since 2011 are scheduled to begin to phase out in fiscal 2015, which begins on July 1. [Emphasis added.]
* Crain’s talked to Moody’s…
For Moody’s, breaking the gridlock over pension reform was almost as important as the agreement itself — but any decisions on the state’s credit rating won’t be made until analysts review the actuarial data underlying savings claims.
“Interestingly, the legislature’s action does appear to end a long period of political paralysis,” said Ted Hampton, a vice president and senior Illinois analyst for the Wall Street credit rating agency. “We’ve lowered the rating repeatedly because of the legislature’s failure to deal with this problem. The legislature has taken some action to alter that history of being unable to reach any agreement. I think that’s significant.”
“Based on what we’ve heard, these reforms do appear substantial,” he added, if the actuarial analysis backs them up. “The other big asterisk is that we have to see how this reform package fares in the courts.”
Municipal bonds from Illinois rallied to a one-month high after lawmakers broke through decades of political gridlock to pass a measure addressing the nation’s worst-funded state pension system.
About $4.4 million of taxable Illinois general-obligation bonds maturing in March 2016 traded today at an average yield of 1.8 percent, the lowest since Nov. 8, data compiled by Bloomberg show. Yields move inversely to prices. The volume that changed hands was the highest since July.
The “good” news, as far was Wall St. goes, is that the General Assembly was finally able to come to a bipartisan agreement.
The bad news is the aggressive push-back against this agreement between Democrats and Republicans from GOP Sen. Mark Kirk, Bruce Rauner, the richest man in Illinois Ken Griffin as well as tea partier types like Sen. Jim Oberweis’ US Senate primary opponent will make it difficult to forge more such agreements on other issues down the road.
* What the Rauner/Illinois Policy Institute/Etc. cabal wants is for the Republicans to withdraw from negotiations and make the Democrats take all the hard votes by themselves. Dan Proft sent this out Monday…
According to [the Republican legislative leaders’] conduct, being the wheelman for Chicago Democrats’ latest heist of Illinois taxpayers (and public sector pensioneers) is morally superior and politically preferable to not participating in the crime. […]
Sen. Radogno appeared on the WLS radio show I co-host in Chicago this morning defending her support for the Madigan pension deformation legislation wherein she said, “I didn’t come (to Springfield) to play partisan games.”
Clearly. And that post-partisan patter is precisely why Republicans are in the super-minority.