Wednesday, August 29, 2012

Life in "Progress" State - Illinois edition

Standard & Poor's Ratings Services on Wednesday downgraded Illinois' credit rating by one notch to A from A-plus, citing the state's large budget imbalance and an $83 billion unfunded pension liability.

The action affecting the state's general obligation bonds comes less than two weeks after a special Illinois legislative session on pension reform ended without a solution to rein in costs for the state's five pension funds.

"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 S&P analyst Robin Prunty in a statement.

Investors in the $3.7 trillion U.S. municipal bond market have been demanding higher yields for Illinois debt as the state's fiscal problems fester. Many states are struggling with budgetary constraints and pension liabilities, but the fiscal problems in Illinois predate the 2007-2009 recession and have continued to worsen.

It also keeps Illinois as the second lowest-rated U.S. state after California, which is rated A-minus by S&P.

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