Standard & Poor's Ratings Services lowered its rating on Illinois' general obligation (GO) bonds to A from A-plus. At the same time, Standard & Poor's assigned its A rating to the state's $50 million GO bonds of September 2012. The outlook is negative.
"The downgrade reflects the state's weak pension funding levels and lack of action on reform measures intended to improve funding levels and diminish cost pressures associated with annual contributions," said Standard & Poor's credit analyst Robin Prunty. "The downgrade also reflects continued financial weakness despite significant measures in the past two years to improve structural budget performance," added Prunty.
The negative outlook reflects the potential for further erosion of the state's pension funds during the two-year outlook horizon and the uncertainty and risk to future budget performance due to the expiration of personal and corporate income tax rate increases on Jan. 1, 2015, which the rating agency believes could weaken financial operating results.