S&P Cuts Illinois Credit Rating For “Weak Financial Management” of Pension Liabilities

S&P Global Ratings on Friday downgraded Illinois’ credit rating to BBB — two steps above junk — for its “weak financial management” in general, as well as its “lack of ability or willingness” to adopt a long-term plan to deal with pension liabilities.

From CNBC:

“The downgrade reflects our view of continued weak financial management and increased long-term and short-term pressures tied to declining pension funded levels,” said S&P analyst John Sugden in a statement.

S&P said another downgrade could follow “should the state continue to demonstrate a lack of ability or willingness to adopt a long-term structural budget solution that also incorporates a credible approach to its long-term liabilities.”

The credit rating agency added that continued political gridlock could affect Illinois’ ability to pay off its debt.

“Although we don’t foresee this in the immediate future, challenges to the state’s debt payment priority could emerge should liquidity dwindle to the point where it affects the state’s ability to provide essential services,” S&P said.

The downgrade to just two notches above the junk level came as the nation’s fifth-largest state prepares to sell as much as $1.7 billion of new and refunding general obligation (GO) bonds in October despite having to pay a hefty penalty in the U.S. municipal market.

Governor Bruce Rauner’s office said S&P’s report underscores the need for “tangible” pension reform.

“It’s time for the super majority in the legislature to recognize the current pension system is fatally flawed and requires immediate action,” his office said in a statement. “Governor Rauner continues to fight for pension reform and other fundamental, structural reforms that will free up resources to help balance the budget.”

Share This Post

Recent Articles

One Response to “S&P Cuts Illinois Credit Rating For “Weak Financial Management” of Pension Liabilities”

Leave a Reply

Privacy Policy | © 2017 Pension360 and © 2014 Policy Data Institute | Site Admin · Entries RSS ·