Moody's Investors Service downgraded the general obligation bond rating of Cook County, Ill., to Aa3 from Aa2 with a stable outlook, in part because of a declining funding ratio at the $7.6 billion Cook County Annuity & Benefit Fund, Chicago.
A Moody's report notes that the retirement system's funding ratio declined to 60.7% in fiscal year 2010, from 85.9% in fiscal year 2007. The system's unfunded actuarially accrued liability increased to $5.1 billion in fiscal year 2010, from $3 billion in 2008.
The report notes that the rating and outlook could be upgraded if the unfunded liability is reduced.
Moody's analyst Genevieve Nolan said in a telephone interview that pensions are but one factor Moody's considers in an overall bond rating. She did not give a specific funded status benchmark that would trigger an improved rating or outlook.
“There is no specific numerical target that Moody's looks at for the funded ratio. Moody's considers the overall health of the pension fund and management's actions in the aggregate in addressing unfunded liabilities,” she said.
“The county's financial challenges have continued to grow, but going forward it is well-positioned to maintain its current rating as it has a variety of revenue and cost-cutting options still available,” the report states.
The fund's executive director, Daniel R. Degnan, could not be reached for comment.