Monday, January 14, 2013

Press Release: Illinois State Treasurer Dan Rutherford Connecting Continued Bond Rating Reductions to Inaction by Governor and Legislature

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Illinois State Treasurer Dan Rutherford Connecting Continued
Bond Rating Reductions to Inaction by Governor and Legislature
CHICAGO—January 13, 2013—Illinois State Treasurer Dan Rutherford is releasing a two year timeline to demonstrate the cause of Illinois’ sinking bond ratings as a result of inaction to reform public pensions by the governor and the Illinois General Assembly.

The attached document illustrates 2011 until today; it begins with the historic 66% income tax increase, continues by plotting the dates of failed significant legislative deadlines, and then demonstrates the related timing of action taken by the three major ratings firms against Illinois for the legislature’s lack of will to fix our unsustainable public pension system.

“The latest hit is from Fitch Ratings,” Rutherford said. “Fitch announced on January 11 that the agency has placed Illinois’ general obligation bonds rating on negative watch. Fitch decided to do this because of the state’s inability ‘to address its large and growing unfunded pension liability.’ The next step could potentially be the downgrade of the state’s General Obligation bond rating from Fitch. Failure to enact pension reforms will eventually bring Illinois to its financial breaking point, and it will be worse than any fiscal calamity we have seen thus far in this state. Our state’s credit rating cannot afford to take another hit.”

This warning from Fitch is in fact the seventh warning, downgrade, or negative outlook change aimed at Illinois’ various bonding entities in the last year from the three ratings agencies: Fitch, Standard & Poor’s, and Moody’s.

Rutherford continued, “Furthermore, it has now been two years since Governor Pat Quinn’s 66% income tax hike was passed, and though it was billed as a measure that would help solve the state’s financial problems, money matters in Illinois have only gotten worse. On January 11, 2011, the state’s backlog of bills was reportedly $8.5 billion. Today the state owes vendors nearly $9 billion dollars.”  

“In the past decade, the state’s bonded debt has nearly tripled. Illinois’ debt is colossal and growing-- our debt obligations now exceed $200 billion. It is estimated that the failure to address the state’s pension liability is costing the state at least $17 million per day. It is beyond irresponsible to let this continue. The state needs to rein in the pension escalation and not use long-term borrowing as a ‘solution’ to this problem.” 


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