CHICAGO — Illinois received a reprieve from Standard & Poor’s Wednesday over its failure to act on pension reforms during its spring legislative session, but the agency renewed its message that the clock is still ticking on its negative view of the state and its mammoth pension woes.
S&P rates Illinois’ general obligation debt A-plus with a negative outlook that was assigned in January 2011. “We expect to resolve the outlook on Illinois this year based on our review of the fiscal 2013 enacted budget and the state’s progress, if any, on addressing its significant pension liabilities and associated cost pressures,” read the report from analysts Robin Prunty and John Sugden.
The state is struggling with $82.9 billion of unfunded pension liabilities — representing a funded ratio of just 43% — and will pay $5.2 billion toward pensions in fiscal 2013, up by $1.1 billion in the current fiscal year.
The report comes nearly one week after political differences derailed pension reforms in the Illinois General Assembly despite pressure from Gov. Pat Quinn.
Before adjourning, lawmakers did limit spending growth in the $33.7 billion fiscal 2013 budget, completed a $2.7 billion overhaul of Medicaid, and made a dent in the $8 billion to $9 billion of unpaid obligations being carried into the next fiscal year.
The report said the Standard & Poor’s would be evaluating the budget to assess progress in moving toward structural balance, the soundness of state revenue estimates, and implementation risks of the Medicaid changes.
“There was no action during the regular legislative session on pension reform and we consider this negative from a credit standpoint,” the analysts wrote. “Despite significant revenue enhancement and ongoing revenue recovery, structural budget balance has been elusive and liquidity remains strained due to the state’s growing accumulated deficit.”
Quinn in a statement sought to use S&P’s message to his advantage. “It is clear from this as well as past ratings agencies’ comments that pension reform must happen immediately,” the statement read.