CHICAGO - Two rating agencies weighed in Thursday to say an Illinois judge's decision to temporarily halt implementation of the state's pension overhaul does not pose an immediate credit concern.
Both Fitch Ratings and Standard & Poor's in special commentaries Thursday noted that Gov. Pat Quinn's proposed $38 billion general fund budget for fiscal 2015 does not incorporate any savings from the December reforms, meaning the delay has little budgetary impact.
Five lawsuits challenging the constitutionality of the reforms have been filed and consolidated in the Sangamon County Circuit Court although the state Supreme Court is expected to render the ultimate decision on their constitutionality.
A successful request to delay the June 1 effective date of the pension legislation was widely expected.
"Fitch Ratings does not view yesterday's granting of a stay on implementation of the state of Illinois' recent pension reform as an immediate credit concern," Fitch analysts wrote. "Fitch assumed that the reform would confront a strong legal challenge. "
Fitch viewed passage of the overhaul as a positive indication of Illinois' willingness to take action on a complicated challenge straining the state budget, but has withheld any change in the state's A-minus rating or negative outlook.
Standard & Poor's also on Thursday said the court's decision to grant a temporary restraining order won't impact the state's A-minus rating or its developing outlook.
"We cited the legal challenges to the pension reform legislation and the associated implementation risk when we revised the outlook on the state to developing from negative, and we will continue to monitor the legal process relating to the pension legislation," Standard & Poor's said.
Standard & Poor's views the overhaul as a "significant accomplishment that could lead to improved funding levels, greater plan sustainability, and improved prospects for budget stability" if upheld.
The We Are One Coalition of labor issued a statement after the court order Wednesday.
"This is an important first step in our efforts to overturn this unfair, unconstitutional law and to protect retirement security for working and retired Illinois families," said Michael Carrigan, president of the Illinois AFL-CIO.
