* This wasn’t the much-feared double-downgrade. S&P’s action still leaves the state in investment grade territory, but just barely…

Continuing pension problems have earned Illinois another reduction in its credit rating.

Standard & Poor’s Ratings Services announced Wednesday that it is lowering Illinois’ rating a notch. The decision is based on weak funding for government pensions and a “lack of action on reform measures.”

* The official statement also warned about the expiration of the income tax hike…

-Standard & Poor’s Ratings Services lowered its rating on Illinois’ general obligation (GO) bonds to ‘A’ from ‘A+’. At the same time, Standard & Poor’s assigned its ‘A’ rating to the state’s $50 million GO bonds of September 2012. The outlook is negative.

“The downgrade reflects the state’s weak pension funding levels and lack of action on reform measures intended to improve funding levels and diminish cost pressures associated with annual contributions,” said Standard & Poor’s credit analyst Robin Prunty. “The downgrade also reflects continued financial weakness despite significant measures in the past two years to improve structural budget performance,” added Ms. Prunty.

The negative outlook reflects the potential for further erosion of the state’s pension funds during the two-year outlook horizon and the uncertainty and risk to future budget performance due to the expiration of personal and corporate income tax rate increases on Jan. 1, 2015, which we believe could weaken financial operating results.

* Gov. Pat Quinn tries to get ahead of the blame curve with an early statement…

“Today’s action is no surprise.

“Over and over again this summer, I made clear that if we do not act on pension reform, the state of Illinois would suffer the consequences. Now it has.

”Eliminating our $83 billion unfunded pension liability is vital to getting our financial house in order. Today’s action by Standard & Poor’s is more evidence that we must act.

“I cannot act alone. We must work together to make the tough decisions necessary to correct poor financial decisions made by previous governors and legislatures over decades that created this situation today.

“We cannot fix these challenges overnight but, as we have shown with the Fiscal Year 2013 budget by reducing our Medicaid liability by more than $2 billion, paying down $1.3 billion in bills, and taking discretionary spending to below 2008 levels, steady progress can lead Illinois to sound financial footing.

“The only thing standing between Illinois and comprehensive pension reform is politics.

“We must put politics aside. Pointing fingers will not resolve this problem. Inaction on pension reform is unacceptable and unfair to our children.

“We must address the unfunded pension liability and we can only do it together. I am inviting the four legislative leaders to a meeting in early September to work on pension reform. Illinois cannot move forward without it.”

The governor didn’t call a leaders’ meeting for most of the summer. Now, he appears to be hoping that the downgrade will move people off the mark. Don’t bet on it.

*** UPDATE 1 *** The two Republican legislative leaders have released a joint statement that attempts to avoid any blame…

“When the Democrats adjourned the special session on pensions two weeks ago, we stood together and said we should not leave Springfield until we pass comprehensive pension reform to address our crisis. We continue to be ready to address the problem, armed with ideas and solutions that could work. We cannot wait until after the election, or even after the Governor’s grassroots’ tour. The time for action is now. S & P’s downgrade today cited our ‘lack of action on reform measures’. This is a clear signal that we must work on a comprehensive bill that solves our pension problem—not a piecemeal approach. The blame game must end, let’s get to work.”

*** UPDATE 2 *** Our neighbor to the north kicks us while we’re down…

“There could not be a more stark contrast between Wisconsin and Illinois,” Walker said in a statement response to the rating. […]

“Political leaders in Illinois kicked the can down the road,” Walker said Wednesday, “raised taxes, and ignored fiscal realities. Now, they’re realizing the consequences of their actions: credit downgrades and negative outlooks.”

If taxes hadn’t been raised to Wisconsin-like levels, our fiscal problems would now be infinitely worse.

…Adding… The AP adds some context. Is Walker still upset over his recent thumping by Illinois?…

Walker has tried to use Illinois’ economic problems to lure businesses to his state. Last week, though, Illinois landed an aerospace company that Walker was courting.