* For Bruce Rauner, the Wall St. Journal editorial page, the Illinois Policy Institute and everybody else who’s been loudly complaining that the pension reform bill doesn’t spill enough blood on the floor, Moody’s has some news for you…

* From the rating agency itself…

Illinois Pension Reform Legislation Is Credit Positive

Illinois Governor Pat Quinn yesterday signed a bill (Senate Bill 1) that, according to legislative documents, reduces the state’s unfunded pension liability by about 20%, a credit positive for Illinois (A3, negative), the lowest-rated US state.

The reforms face a legal challenge from organized labor but, if implemented, we believe they will substantially ease the pension funding pressure that has helped trigger five Illinois downgrades since early 2009.

Illinois’ unfunded pension liabilities – which totaled $100 billion in June 2013 on an as-reported basis, or $173 billion according to Moody’s adjusted net pension liability calculation – are the largest of any US state.

The state General Assembly’s passing of SB 1 on December 3 ended a multi-year impasse over how to reverse severe deterioration in the state’s pension funds.

Formal actuarial data on reforms’ effects still to be evaluated

We have yet to receive formal actuarial data detailing SB 1’s effects on accrued pension liabilities and future state contribution requirements, but we will evaluate them, when available. The preliminary estimates disclosed by the state legislature say the reforms will lower contributions during the next 30 years by $160 billion in nominal terms, to $214 billion, while putting the state pensions on a path to full funding over a closed, 30-year period. The state expects to reduce its contribution in the first year after implementation by $1.2 billion, or 20%, according to the legislative figures. The savings come from reforms affecting current members of the State Employees’ Retirement System (SERS), the State Teachers’ Retirement System (STRS), the State Universities Retirement System (SURS) and the General Assembly Retirement System (GARS), which account for the bulk of the state’s unfunded pension liability. SB 1’s reforms do not apply to the fifth statewide plan, for judges.

Supplemental contributions may help state reach full funding faster

Including the impact of supplemental funds provided for in the law, the legislature expects the public pensions to reach fully-funded status in about 25 years. Prior governing statute, by contrast, required annual state contributions based on a goal of achieving an actuarial assets-to- liability (“funded”) ratio of 90% over 50 years. Supplemental contributions would be derived from two sources: 10% of savings from cost of living adjustment (COLA) and other pension plan changes and the revenue currently being used to provide debt service on two pension funding bonds issued in 2010 and 2011. The last of those bonds mature during fiscal 2019, when debt service requirements total $900 million. These supplemental funds, which will total more than $1 billion annually starting in fiscal 2020, would be deposited into the Pension Stabilization Fund in the state treasury and transferred monthly to the systems. These supplemental payments will not be used to reduce the state’s base contributions, which under SB 1 must be enough to achieve full amortization of unfunded liabilities over a 30-year period.