Illinois Credit Rating Downgraded to A-

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Illinois flag

 

 

My poor Land of Lincoln!  With a credit rating already the lowest of any state, the credit rating of Illinois has been downgraded by Fitch to A-.

Fitch believes that the burden of large unfunded pension liabilities and growing annual pension expenses is unsustainable, and that failure to achieve  reform measures despite the substantial focus on this topic exacerbates concern about management’s willingness and ability to address the state’s numerous fiscal challenges,” the ratings service wrote.

Separately, Moody’s Investor Service had warned about the potential downgrade Friday, the final day of the legislature’s spring session. Lawmakers went home for the summer unable to agree on pension reform. House Speaker Michael Madigan and Senate President John Cullerton, both Chicago Democrats, had passed dueling versions of pension reform based on different approaches.

Democratic Gov. Pat Quinn said he plans to meet with Madigan and Cullerton on Tuesday and called the downgrade “no surprise.”

“As I have repeatedly made clear to the General Assembly, this will continue to happen until legislators pass a comprehensive pension reform bill, and put it on my desk,” Quinn said in a statement. “Every time the General Assembly misses the deadline, Illinois’ credit rating is downgraded, which hurts our economy, wastes taxpayer dollars and shortchanges the education of our children.”

Fitch also gave Illinois a “Negative Outlook” because it lacks solutions to its multibillion-dollar backlog of old bills. The state just passed a $35 billion-plus operating budget  but the state comptroller predicted the backlog of older, unpaid bills could hit $7 billion within a couple of month.

 

Go here to The Chicago Tribune to read the dismaying rest.  The reaction of the powers that be in Illinois to all of this has been similar to that of Homer Simpson when he purchased a van despite already being a bankruptcy waiting to happen Substitute a high speed rail system between Saint Louis and Chicago that makes no economic sense and the analogy is perfect.  Illinois is de facto bankrupt, and eventually it will be de jure bankrupt.

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3 Comments

  1. That will leave a mark – in the form of higher interest expenses.

    Still, it appears to be a liberal interpretation of the creditworthiness of the state.

    A- is “investment” grade.

    From BB down to D the issuer would be sub-investment/speculative/junk, at which point banks would be barred from acquiring IL debt instruments.

  2. “a high speed rail system between Saint Louis and Chicago that makes no economic sense”

    It will when gas hits $5 a gallon or more (and it will, sooner or later) and people can’t afford to drive or fly between these cities. This route has been steadily increasing in ridership and being able to make a day trip to Chicago and back for less than $40, without having to worry about parking, is a great deal. Where Amtrak is losing money is on the long-haul routes; routes like STL-CHI or Boston-NYC-DC that are too long for driving but too short to be worth paying out the nose for an airline ticket are, IMO, where passenger rail has the most potential.

    As for the state credit downgrade Quinn has reacted by calling a special legislative session for June 19 to deal with the problem. Yawn.

  3. “It will when gas hits $5 a gallon or more (and it will, sooner or later) and people can’t afford to drive or fly between these cities.”
    I very much doubt it Elaine. This monumental boondoggle will cost 3.6 billion dollars. I doubt if we will every see a cent of that come back in profit, and I suspect the “high speed trains”, which they really are not, will operate at a continual loss in Illinois. I suspect that fracking will additionally drive down the cost of gas eventually, especially when we no longer have a Green Luddite regime when it comes to energy ensconced in Washington.

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