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* From S&P…
Standard & Poor’s Ratings said Illinois is approaching a precipice from a credit standpoint due to the lack of action on pension reform legislation by the state’s General Assembly when it ended its 98th session on May 31.
In January, we downgraded the state based on our view of Illinois’ weakened pension funded ratios and lack of action on reform measures. We acknowledged at the time of the downgrade that action could occur during the regular legislative session but was unlikely given the poor record of the past two years and the lack of consensus on a plan to address the liability.
The May 31 outcome was in line with our expectations in January, so the current rating of ‘A-’ and the negative outlook on the state’s $28 billion of outstanding general obligation (GO) bonds are unaffected by the most recent round of pension reform deliberations that kicked the can down the road yet again.
From a credit standpoint, Illinois is approaching a critical juncture within a year as state policymakers face escalating pension liabilities and chronically high payables while simultaneously addressing pending statutory reductions in personal and corporate income tax rates. This is in addition to the other challenges confronting the state sector, including health care reform implementation, federal fiscal consolidation, slow economic recovery, and pent-up spending demand from a range of program areas affected by sharp funding reductions in recent years. The ability of Illinois to affect change to revenues and spending programs is well established, so future credit direction will largely hinge on the willingness of policy makers to decisively address chronic budget and pension issues. [Emphasis added.]
posted by Rich Miller
Thursday, Jun 6, 13 @ 3:25 pm
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Previous Post: *** UPDATED x3 *** Prepare yourselves for a special session
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–Standard & Poor’s Ratings said Illinois is approaching a precipice…–
–From a credit standpoint, Illinois is approaching a critical juncture…–
Yeesh, a precipice then a juncture? What’s next, a fork in the road? A rendezvous with destiny?
Someone at S&P must be taking a creative writing class at NYU.
Comment by wordslinger Thursday, Jun 6, 13 @ 3:34 pm
On the bright side, the state went one-for-three with the rating agencies on downgrades.
You could bat cleanup for the Sox with that kind of average.
Comment by wordslinger Thursday, Jun 6, 13 @ 3:37 pm
Does this mean we can cancel the special legislative session and head for the beach? We’ll take our cell phone, promise!
Comment by Old and In The Way Thursday, Jun 6, 13 @ 3:41 pm
If anyone on here is an arrested development fan. This reminds me of when the Bluths celebrated being moved from “sell” to “don’t buy” by Jim Kraemer from Mad Money. In that same vein, Jeffrey Tambor resembles PQ.
Comment by Come on man! Thursday, Jun 6, 13 @ 3:45 pm
“When you’ve chewing an life’s gristle, Don’t grumble give a whistle And this’ll help things turn out for the best.
Always look on the Bright side of life”
Comment by Ahoy! Thursday, Jun 6, 13 @ 3:56 pm
=== ” The ability of Illinois to affect change to revenues and spending programs is well established” ===
Does that undermine the “police powers” rationale underpinning SB1 ?
Comment by titan Thursday, Jun 6, 13 @ 4:06 pm
- Ahoy! - Thursday, Jun 6, 13 @ 3:56 pm:
I assume good taste and decorum prevented you from quoting one verse in particular…..however appropriate. Good one!
Comment by Old and In The Way Thursday, Jun 6, 13 @ 4:12 pm
S&P sees a problem in a year.
The temporary tax increase starts to phase out in a year.
Must be pure coincidence!
Comment by RNUG Thursday, Jun 6, 13 @ 4:35 pm
Ahoy! @ 3:56 pm:
Appropriate …
and I understand why you didn’t do the full quote, for the same reason I only used portions of some Jim Steinman lyrics last week.
Comment by RNUG Thursday, Jun 6, 13 @ 4:45 pm
Well, talk about a weak silver lining around the Land of LINColn’s Post-Legislative Session’s Cloud! Seeing that ugly problem developing REAL quickly up ahead at the Intersection, and turning “right” NOW, even onto that reasonable alternative route of a Side Street (ala known as “Compromise Street”) so as to do AWAY with and OVERCOME driving right INto that “Critical Juncture” is sure BETTER than running right INto that massive Pothole ahead at the “Juncture” as well as the upcoming, further Delay Signs, and Congestion AHEAD up there (ala, facing yet aNOTHer horrible and expensive “Downgrade” for your soon-to-be even MORE bashed-up Illinois Vehicle), I would think…!
Comment by Just The Way It Is One Thursday, Jun 6, 13 @ 5:38 pm
The pension answer is simple and immediate, CTBA’s
Plan by ralph Martire refi’s the pension liability in a new 50 year flat payment that gets to 90% funding. Corporate pressure politics are pushing horrible pension cuts on little old lady teachers and secretaries to squeeze 100 % system solvency into the remaining 30 years of the current pension funding “ramp” , a ramp that the state fiscally screwed up with arbitrage borrowing in 2003 and pension holidays in 05/06.
Comment by Anon Thursday, Jun 6, 13 @ 6:01 pm
The danger here is the very real prospect that the GA passes an unconstitutional pension “reform” and the ratings agencies see it for what it is and the credit ratings do not improve. In fact they could well continue to decline. They are not just looking at pension debt and liability but also spending and yes, revenue.
Increasing spending by $2 billion while you have over $5 billion in unpaid bills is arguably just as irresponsible as underfunding the pensions. It’s not just pensions folks! The governor (small g) would have had a lot more credibility and leverage had he tried to rein in the ridiculous increase in spending. It’s pretty hard to take PQ serious in this light.
Comment by Old and In The Way Thursday, Jun 6, 13 @ 6:05 pm
I’m surprised nobody else commented on what I found so sad about this. “We acknowledged action could occur during the regular session but was unlikely given the poor record during the last two years…” We’re so predictably pathetic that they didn’t think it likely we’d have a fix. Sad sad sad.
Comment by Chicago Cynic Thursday, Jun 6, 13 @ 8:52 pm
Translation: there is no downgrade because S&P already knew before hand this would remain in total gridlock.
Comment by Hawkeytown Thursday, Jun 6, 13 @ 11:04 pm