Illinois is still paying the price for the failure to to put its pension costs in line this month. The Wall Street Journal reports that S&P has just downgraded Illinois’ credit rating from A to A- citing a “poor track record” on budgetary issues and the repeated failures to pass any form of pension reform. Illinois now has the worst credit rating of any state in the nation, lower even than California, which has the same rating but was at least given a positive outlook by the agency last year. In Illinois, by contrast, S&P is pessimistic that anything can be done, and expects that the rating may fall further as time goes on:
The decision by S&P follows the collapse earlier this month of a proposal in the Illinois legislature to address the deepest public-pension shortfall in the nation. Negotiations continue, but there remains no agreement around how to fill an estimated $95 billion pension hole. S&P in its downgrade cited the legislature’s “poor track record” on the issue and the likelihood of legal challenges if a plan passes.
It’s not too late for Illinois to address its pension problem, but the more time passes, the harder it will be to fix it. And if borrowing costs rise, as it now appears they will, things are likely to get much worse before they get better.