SPRINGFIELD - Illinois State Treasurer Dan Rutherford held an emergency phone presser Friday afternoon to discuss the Standard & Poor's downgrade, taking Illinois down to the 50th out of 50 states for poor credit worthiness.
"Every time the governor and General Assembly have set deadlines to meet to address the public pension system, and they have not fulfilled that since the January 2011 income tax increase, there has been some negative issuance by the bond rating agencies," Rutherford said.
A bond rating agency will look at the credit risk of a sovereign government like Illinois similar to what a credit rating would be for an individual. If an individual has a poor credit rating and goes in to get a home mortgage, he will pay more in interest because of his bad credit. The same thing exists for the bond rating agencies.
This downgrade will skyrocket pension costs next year. The state's FY2014 budget lists a projected revenue growth of $600 million, the treasurer said, but the increased payments for 2014 will be $945 million.
"It is very obvious that that $345 million difference is going to have to be resolved one of three ways," Rutherford said, "One, borrow the money - that is absolutely inappropriate. Two, raise more taxes and fees - I believe that is absolutely inappropriate. Or three, cut the budget by $345 million."
To cut the budget will be difficult for this governor and this General Assembly, he said. But, Rutherford said, the figures have grown to the size that they can no longer be covered up. The General Assembly will be forced to face pension reform or the downgrades will continue and taxpayer burden will increase.
What if nothing is done, and the Democrats - now with super majorities in both Houses - do not deal with the problem, and kick the can down the road once again, or make non-effective changes to the system as it is?
"We'll be the lowest credit risk in the nation, which will drive more and more interest than going to principal," Rutherford said.
And the worst case scenario if the pension issue is not resolved?
"I'm not sure I want to project that," Rutherford said and closed down the presser.