Illinois' Credit Rating Sinks Further

By aaroncynic in News on Jun 6, 2013 7:30PM

If we thought Illinois’ credit rating couldn’t get any worse, we were wrong. Today Moody's Investors Service downgraded the state’s rating to A3 from A2, citing the pension crisis. Since Fitch Ratings downgraded the status on Monday and Standard and Poor’s rating remains unchanged, that gives Illinois a bad credit hat trick. Crain’s Chicago reports Moody’s “now assumes the government will not take action to reduce the state's pension liabilities any time soon.” The Moody’s rating ranks Illinois’ credit just three steps above junk bonds.

ABC7 reports Governor Quinn will call for a special session in the legislature this month to address the pension crisis. Even still, we can’t expect to dig ourselves out of the black hole anytime soon. The Moody’s report continued:

“Without significant reforms, substantial growth in both unfunded liabilities and in annual funding burden are likely in coming years. This trend may coincide with the expiration of most of the income tax increases the state imposed in fiscal 2011 to help cover pension costs. As a consequence, its payment backlog will likely remain large, despite some recent signs of improvement. An A3 rating, while very low for a U.S. state, is consistent with the General Assembly's inability to steer the state from a path of fiscal distress.”

The governor has called a special session of the legislature, but is that too little too late?