CHICAGO - One of the major bond rating agencies Friday took the first step toward downgrading Illinois debt in the wake of the Legislature's failure to deal with pension reform in its lame-duck session.
Fitch Ratings put the state's A rating on a negative watch. That means Fitch is effectively clearing its throat — with an actual downgrade nearly certain by midyear if the state does not take corrective steps.
The watch applies to $26.2 billion in outstanding Illinois general-obligation debt, as well as $438 million in Illinois Sports Facilities Authority bonds.
Treasurer Dan Rutherford spoke about the development:
Fitch Ratings announced that the agency has placed Illinois’ general obligation bonds rating on negative watch. Fitch decided to do this because of the state’s inability ‘to address its large and growing unfunded pension liability.’ The next step could potentially be the downgrade of the state’s credit rating from Fitch. Failure to enact pension reforms will eventually bring Illinois to its financial breaking point, and it will be worse than any fiscal calamity we have seen thus far in this state. Our state’s credit rating cannot afford to take another hit.
Furthermore, it has now been two years since Governor Pat Quinn’s 66% income tax hike was passed, and though it was billed as a measure that would help solve the state’s financial problems, money matters in Illinois have only gotten worse. On January 11, 2011, the state’s backlog of bills was reportedly $8.5 billion. Today the state owes vendors nearly $9 billion dollars.
In the past decade, the state’s bonded debt has nearly tripled. Illinois’ debt is colossal and growing-- our debt obligations now exceed $200 billion. It is estimated that the failure to address the state’s pension liability is costing the state at least $17 million per day. It is beyond irresponsible to let this continue. The state needs to reign in the pension escalation and not use long-term borrowing as a ‘solution’ to this problem.
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