SPRINGFIELD — One of the nation's leading credit-rating firms put Illinois on a negative watch list today because Gov. Pat Quinn and state lawmakers failed to address the overwhelming public pension debt in the just-completed lame-duck session.
Fitch Ratings delivered its designation due to the "ongoing inability of the state to address its large and growing unfunded pension liability," specifically noting the outgoing legislature shut down Tuesday without taking action on pension reform.
The credit rating was listed at the already-low designation of "A" but with a stable outlook. It is still rated "A" but now has an outlook known as "rating watch negative." The move could make it more expensive for the state to borrow money.
Only California is below Illinois among states on this rating firm's list, and California could leap ahead of Illinois if nothing gets accomplished in the newly sworn General Assembly's spring session, said Karen Krop, the primary analyst and senior director for New York-based Fitch Inc.
Yet another political meltdown that fails to rein in the state's $96.8 billion debt this spring would likely result in a potentially costly "downgrade of the rating," Krop said.
"Fitch believes that enactment of reform is critical to the long-term stability of the state's fiscal position, although legal protection of pension benefits is particularly strong in Illinois and
Fitch expects any changes to be litigated," the company's report said.
The news came as no surprise to Quinn, who has warned the legislature must act to halt the state's ratings slide.
"The Fitch report speaks for itself," said Abdon Pallasch, Quinn's budget spokesman. "This should be required reading for every member of the new General Assembly. We have an emergency, and it's not going away."
The Democratic governor repeatedly has called on lawmakers to pass legislation but cannot bring them together. Frustrated as time ticked down on the outgoing legislative session on Tuesday, Quinn even offered up an unsuccessful Hail Mary proposal to set up a commission to make the toughest decisions. The idea was for the commission to recommend decisions that would have gone into place automatically unless legislators would have rejected them.
The commission was a last-ditch alternative to getting the House and Senate to agree on one bill to send to the governor's desk. But the commission died for lack of support in the full House as lawmakers said they believed their own pension negotiations were making progress.
Senate President John Cullerton, D-Chicago, introduced his own reform package as Senate Bill 1 in the new General Assembly, symbolizing the seriousness of the issue.
"The rating agencies continue to provide a clarion call for action on pensions," said Rikeesha Phelon, Cullerton's spokeswoman. "The Senate president is committed to this issue and has demonstrated his willingness to compromise in order to stabilize pensions and the state budget."
House Speaker Michael Madigan, D-Chicago, said he hoped it could be done soon. But how soon anything can get done is always the question in Springfield, where big issues can drag on for months or years.