Standard & Poor’s lowered its rating on Illinois’ general obligation debt to A- from A on Friday, citing the funded status of the state’s pension plans and the inability of the Legislature to enact pension reform.
It also rated the state’s $500 million of general obligation bonds of Feb. 13 as A- and said the outlook is negative.
On the same day, Moody’s Investors Service assigned an A2 rating to the February issuance of bonds, also citing pension funding pressures.
The aggregate funded status of the state pension plans decreased to 40.4% at the end fiscal year 2012, which ended June 30, from 43.4% at the end of fiscal year 2011.
The ratings action come a few weeks after the lame-duck General Assembly session ended without any pension reform enacted.
“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,” according to an S&P news release, which added that any reform would likely be challenged in the courts and could take several years before it “translates into improved funded ratios and budget relief.”