Standard & Poor's rating services has lowered Illinois' credit rating, blaming the state's pension problems.
The New York-based agency said Friday that the rating on the state's general obligation bonds was downgraded to A- from A. The agency also gave an A- rating to $500 million in general obligation bonds that the state plans to release in February. The agency says the outlook is negative. Standard & Poor's credit analysts say the downgrade reflects what the agency sees as the state's ``weakened pension-funded rations'' and lack of action on reform measures to improve the state's worst-in-the-nation pension crisis. Illinois has a $96 billion pension deficit.
S & P says the negative outlook reflects what it views as a range of challenges Illinois faces that will require legislative consensus and action. The ratings agency says it believes the outcome of deliberations relating to pension reform and the expiration of current personal and corporate income tax rate increases on Jan. 1, 2015, along with other normal budget pressures, could have a profound effect on the state's budgetary performance and liquidity over the two-year outlook horizon. The Standard and Poor's release also indicates an additional down-grade is possible: "While it is unusual for a state rating to fall into the 'BBB' category, lack of action on pension reform and upcoming budget challenges could result in further credit deterioration, particularly if it translates into weaker liquidity. We could revise the outlook to stable if Illinois achieves pension reform that lowers liabilities and associated costs to the state and takes credible actions to achieve structural budget balance over the two-year outlook horizon."
State Treasurer Dan Rutherford says the Standard & Poor's action on the state's general obligation bond rating gives Illinois the lowest rating of all 50 states.
