The State of Illinois has taken another hit to its credit rating.
Standard & Poor's announced on Wednesday its decision to lower Illinois' credit rating one notch, from A+ to A. The credit rating agency cited state lawmakers’ inability to address $83 billion in unfunded pension liabilities.
Illinois Governor Pat Quinn responded by saying he had warned lawmakers a downgrade was imminent if they failed to act to reform the state’s five pension systems.
“Now, it’s a reality. It’s not a good thing, and it’s regrettable that our legislators did not act promptly when they had a chance,” Quinn said. “But we just have to keep pushing them.”
Brian Battle with Trust Capital Partners explains the implications of the Standard & Poor’s downgrading Illinois from A to A-plus.
House Republican Leader Tom Cross said he’s not surprised by the announcement either. Cross said the Democratic governor needs to show more leadership on the issue.
“We're going to spend almost $8 billion on pensions next year. We can't sustain that,” Cross said. “The idea of shifting from a populist position to a leadership position may be foreign to the governor, but he's going to have to do it.”
Both Cross and Quinn said lawmakers must find a way to provide comfortable retirements for current members of the system but must also protect taxpayers and the future of the state.
Quinn said he’s planning on meeting with legislative leaders early next month to resume negotiations.
A lower credit rating could mean higher interest rates when the state borrows money.
The downgrade leaves Illinois with the nation's second-lowest rating from S&P. California is rated A-, but it has earned a "positive outlook" from the firm.
Moody's rating service has also warned that it may lower Illinois' rating.