Jan 08, 2012 2:53 AM GMT
Worse before they get better...
Illinois, unable to solve its long-running financial problems, was given the lowest credit rating of any state in the country by Moody’s Investors Service on Friday, a move that will increase costs to taxpayers.
A second agency, Standard & Poor’s, left its Illinois rating unchanged but warned of a negative outlook that could lead to a downgrade in the future. A day earlier, Fitch Ratings also left the rating unchanged and declared a stable outlook.
Lower credit ratings generally mean the state winds up paying more interest when it borrows money by selling bonds.
Both Moody’s and S&P said they are troubled by Illinois’ failure to balance its budget and strengthen government pension systems, although a tax increase and other measures have helped.
Moody’s cited “weak management practices” and a recent legislative session that “took no steps to implement lasting solutions.”
Moody’s now rates Illinois “A2,” below any other state. Only one state, California, qualifies for the next-highest rating. All the rest are ranked higher.
Standard & Poor’s flip-flops the states in its ratings. California is worst, with Illinois a notch above.
Gov. Pat Quinn’s office said it was “encouraged” that two of the three agencies decided not to lower the Illinois rating. Spokeswoman Kelly Kraft attributed it to cost-cutting and efforts to overhaul Medicaid, pensions and workers’ compensation.
“More needs to be done,” Kraft added.
She said lawmakers should support additional efforts to control pension costs and to pay overdue bills.
The top Republicans in the Illinois Legislature called the downgrade “very bad news.” Senate Minority Leader Christine Radogno and House Minority Leader Tom Cross said lawmakers must approve major pension and Medicaid changes in the next session.
“Obviously the practice of nibbling around the edges ... has not convinced these bond rating agencies that we are on the road to recovery,” they said in a statement.