Illinois Credit Downgraded

Moody, the credit rating agency, has downgraded Illinois’s credit rating because of our darling legislators’ lack of courage:

Illinois’ bond rating has been cut a notch by Moody’s Investors Service as a new report shows state revenues continue to slide and the pile of unpaid bills continues to grow.

Moody’s cut Illinois’ rating on general obligation bonds from Aa3 to A1, blaming state government’s failure to come up with a permanent solution to its financial problems. Instead, lawmakers relied on a series of one-time fixes to cobble together a spending plan.

“This failure underscores a chronic lack of political will that indicates further erosion of an already weak financial position,” Moody’s said in an opinion about the state’s credit rating.

The report said the state’s credit rating is further threatened by its growing debt burden, large unfunded liabilities for pensions and retiree health benefits, the disparity between spending and revenue and the decision to simply put off paying bills.

“The legislature’s failure to enact recurring budget-balancing measures is consistent with recent years, when infighting between the executive and legislative branches caused budget delays and allows both the erosion of the state’s finances and the widening of severe pension funding gaps,” the report said. “The longer the solutions to the state’s challenges are deferred, the more difficult they will become to implement.”

Illinois’s problems aren’t due to infighting between Democrats and Republicans, they’re primarily of Democratic making and largely the result of the profligate Blagojevich years during which the state expanded any number of programs, borrowing the money to do it from various and sundry including by deferring payments into the public employees’ pension plans, which I deplored at the time.

The choice is among raising taxes and cutting current spending by reducing the state’s payroll or both. I’m sad to say that I think it must be both. However, Illinois can’t dodge its pension obligations and I suspect that it couldn’t even get relief from the courts. That would take a constitutional amendment and it’s hard for me to imagine our present crop of legislators voting against the interests of their largest bloc of supporters and source of campaign funding.