A Wall Street credit rating agency said a recent Illinois Supreme Court decision that upheld constitutional protection for the healthcare benefits of retired state employees makes it more likely that last year’s state pension law will be found unconstitutional.
The 6-1 ruling on July 3 is “credit negative” for the State of Illinois and the City of Chicago, according to Moody’s Investors Service in a Friday report. The Illinois General Assembly in May passed legislation overhauling two of Chicago’s pension plans.
“The majority of the justices expressed views that run counter to the rationale used in recent pension reform legislation for certain city and state plans,” Moody’s said. “We therefore perceive increased risk that the Illinois Supreme Court will rule the pension reform legislation unconstitutional, which would jeopardize $32.7 billion of pension liability reduction.”