The long awaited, much anticipated, and well-deserved day of special recognition for the state of Illinois has come. Today (January 25) the Standard & Poor’s Rating Service downgraded Illinois’ credit rating from “A” to “A-minus”… adding the warning that they are considering a further downgrade if conditions do not improve. If that warning comes to pass, Illinois’ debt rating would be just one small step above the dreaded (and for governments, humiliating) status of “junk bond”.
Illinois’ shameless mismanagement of the responsibilities of government has become widely known and much chronicled in recent years, as Illinois descended to the “bottom of the heap” among our fifty states with regard to financial health. During the past two years, we have, at several points, detailed for you the deplorable state of Illinois’ public pension funds – now universally acknowledged to be the most underfunded and least sustainable within the United States. Among our reports are these: http://www.examiner.com/article/illinois-time-is-running-out-part-i; http://www.examiner.com/article/illinois-time-is-running-out-part-ii; http://www.examiner.com/article/illinois-is-number-one.
As reported in our most recent article, an Illinois legislative commission announced in November that the accumulated unfunded actuarial pension liability of Illinois is now almost $100 billion, while the “funded ratio” has fallen below 40%! The amazing, and extremely disturbing, fact is that this development has been foreseeable and addressable for many years. Illinois political leaders, spearheaded by the extremely powerful Illinois House Speaker, Michael Madigan, has chosen to frequently shortchange the state’s obligation to fund public pension promises, while simultaneously offering richer pension benefits in exchange for political support from union members. To make makes worse, they have adjusted pension qualification rules in ways that have richly benefited key political “friends”. Many of those beneficiaries have therefore become eligible for annual pension income that dwarfs that of the average Illinois citizen!
Of course, none of these politicians will actually accept responsibility for the pension mess. As is the case with difficult, unruly children, Illinois politicians always blame someone else for their collective sins and failures. It is especially laughable and absurd for Madigan and the current governor, Patrick Quinn, to disclaim having key roles in the creation of the pension debacle, not to mention the accrued $9 billion in unpaid state operating fund bills. Quinn has been intimately involved in state government for over 22 years (starting in 1990 as Illinois Treasurer); and Madigan has been in the House for over 42 years – most as Speaker.
Meanwhile, as Illinois sinks more deeply into debt every day, the S&P report describes reality as it is: “While legislative action on pension reform could occur during the current legislative session and various bills have been filed, we believe that legislative consensus on reform will be difficult to achieve given the poor track record in the past two years!”
When will Illinois’ descent toward financial disaster end? Perhaps the only hope is a total change of Illinois leadership at the top – starting with Madigan and Quinn. If something doesn’t happen quickly, S&P has made our fate clear: “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.” http://www.chicagotribune.com/business/breaking/chi-sp-downgrades-illinois-to-aminus-citing-pension-inaction-20130125,0,5893672.story