“Illinois had its debt rating cut one level to A- by Standard & Poor’s, which threatened to downgrade the state again following lawmakers’ failure to bolster the nation’s worst-funded pension system,” the Bloomberg news service reports. “The rating action comes before the state’s planned sale next week of $500 million in general-obligation securities. The deal is still set for Jan. 30, Abdon Pallasch, Illinois’ assistant budget director, said in a telephone interview.”
Essentially, Illinois is digging itself deeper in debt — in an apparent attempt to out-California California.
“The state has the weakest pension system in the U.S., with 39 percent funding for five major groups of public employees, according to the Civic Federation, a Chicago-based nonprofit research group,” Bloomberg explains. “Lawmakers ended their session Jan. 8 without acting on measures to strengthen those funding levels. Illinois also has more than $9 billion of overdue bills to vendors.”
Illinois’ total unfunded liabilities top $275 billion.
Investor’s Business Daily noted that the “blue-state model” is to blame.
The Illinois General Assembly didn’t even attempt pension reform in its last session, but it did raise the state income tax. And it sent Illinois Lottery Director Mike Jones around the world – on the state’s credit card.
“According to Jones’ travel vouchers obtained by Illinois Review, in a little over a year, Mr. Jones has traveled to Washington, DC (twice), San Francisco, London, Rome, Ireland, Atlanta, Montreal, Las Vegas (twice) and Barcelona,” that publication reported in November. “We have no doubt Mr. Jones conducted some business while away on the taxpayers’ dime, but the troubling words ‘personal time’ keep popping up on his travel vouchers while he was in places such as London and Rome.”
Sure, it’s easy to pick on Illinois. Since the 1970s, four of its governors have gone to prison, most recently the highly entertaining Rod Blagojevich.
But the state’s credit downgrade is serious business. It has a ripple effect that goes far beyond bond yields.
“Moody’s already ranks Illinois 50th among the states, and Fitch ranks the state 49th but warns of a negative watch,” IBD pointed out. “Moody’s A2 ranking places it even with Botswana, a southern African nation that is 70 percent desert.”
As Gov. Perry pointed out in his speech Tuesday, Texas is the top destination for people leaving California. We’ll welcome refugees from Illinois, as well.