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home : news : news   June 28, 2016

1/26/2013 7:49:00 AM
Treasurer discusses issues for governor, reacts to downgrade of state credit

S&P lowers Illinois credit rating, blames pensions


Associated Press

CHICAGO (AP) — Illinois’ already disastrous financial situation worsened Friday as another credit rating agency downgraded its rating to the worst of any state in the country, blaming lawmakers’ ongoing failure to resolve a multibillion-dollar pension crisis.

Standard & Poor's rating service said Friday that the rating on the state's general obligation bonds was downgraded to A- from A. The agency also gave an A- rating to $500 million in general obligation bonds that the state plans to release next week. The agency says the outlook is negative, an indication it could take the unusual step of further downgrading the state if conditions don't improve.

The downgrade is just the latest warning from the New York bond houses about the state's ongoing credit deterioration. It means taxpayers will likely pay a higher interest when the state issues bonds, or borrows money, for big items such as construction projects.

Speaking at a press conference on an unrelated topic Friday, Democratic Gov. Pat Quinn said “the pressure is higher than ever” for lawmakers to pass pension reform — something they failed to do during a special legislative session last year and in a lame duck session that ended earlier this month, despite urgent pleas from Quinn and other leaders.

“We've got to put our seatbelts on here and understand the rating agencies won't give us better marks until the legislature passes Senate Bill 1 and gets the job done,” Quinn said, referring to a recently proposed pension reform bill. “That's really the message the credit rating agencies are screaming at the top of their voice. I've heard it, and I think the members of the legislature need to hear it as well.”

Illinois has a $96 billion unfunded liability in its five state-employee pension funds, due to decades of shorting or skipping its pension payments. To catch up, the state must allocate nearly one-third of its general revenue annually to pensions, putting a squeeze on money for services such as education and health care.

Standard & Poor's analysts said Friday the new rating reflects what the agency sees as the state's “weakened pension-funded ratios” and lack of action on reform measures.

“While legislative action on pension reform could occur during the current legislative session and various bills have been filed, we believe that legislative consensus on reform will be difficult to achieve given the poor track record in the past two years,” analysts said.

Moody's Investors Service gave Illinois its worst rating of any state in January 2012. Earlier this month — days after lawmakers left the lame luck session without a pension deal — Fitch Ratings changed Illinois’ financial outlook to “negative” from “stable,” an indication that a ratings downgrade could be coming.

In its report Friday, Standard & Poors analysts said even if Illinois is able to pass pension legislation soon, the state is likely to face a legal challenge, so it could be years before the budget situation or the unfunded liability improve. That, along with an income tax increase that's scheduled to expire on Jan. 1, 2015, contribute to the state's negative economic outlook.

Illinois Treasurer Dan Rutherford, a Republican who's indicated he may challenge Quinn in the 2014 race for governor, said lawmakers’ inaction “has our great state headed for a fiscal disaster.”

“It is beyond irresponsible to let this continue,” he said.

Craig Sterrett
News Editor

State Treasurer Dan Rutherford, formerly a legislator representing the Lostant and Streator areas, told the NewsTribune on Friday morning that the No. 1 problem facing Illinois is it’s problems being able to pay for the state and public pensions.

Rutherford, who was responding to a question about possible candidates for governor, including him, was asked what the biggest issue facingIllinoisis.

“There’s nothing more important than resolving the state-public pension issue,” Rutherford said.

Even Rutherford, a Republican from rural Chenoa, and Gov. Pat Quinn, a Democrat, would agree on that.

Rutherford admitted “We don’t see eye to eye on everything but … for the past two years,” Quinn has set deadlines for the General Assembly to find a resolution to the problem, and the legislators have failed.

Rutherford said the General Assembly now, or the next governor, will have to make “hard choices,” and not all of the different constituencies are going to be pleased with the decisions that will need to be made.

“It’s not too be of a problem to solve. It’s a tough problem to solve,” he said Friday morning, adding that the bond rating organizations had already placedIllinoison watch, warning or given downgrades seven times as of Jan. 24.

Friday afternoon, Standard and Poor’s announced another downgrade ofIllinois’ General Obligation bond debt. Illinois had sunk to an A- rating with a negative outlook, the lowest of all 50 states, the treasurer’s office announced.

S&P stated, “The downgrade reflects what we view as the state’s weakened pension funded ratios and lack of action on reform measures. This rating action is now the eighth negative issuance against Illinois by the various ratings agencies to Illinois’ bonding entities since the beginning of 2012.”

Rutherford stated in a press release: “It is estimated that the failure to address the state’s pension liability is costing the state at least $17 million per day, plus these downgrades continue to make borrowing additional funds even more expensive. The timeline of inaction by Governor Quinn and the legislature has our great state headed for a fiscal disaster. It is beyond irresponsible to let this continue.”

Reader Comments

Posted: Sunday, January 27, 2013
Article comment by: METALWORKER

Good luck Kathy, you are gointo need it.
No one seems to like teachers or unions. Don't know why but they don't.
Heck, they even want you , teachers, to carry guns in your class room with out pay because you earn far too much now.
We, as a state, have three gov. in prison no for misuse of funds.
Rest assured you will get no symp. from any one who reads this paper if you are a teacher or are a member of a union or get Social Secur.

Posted: Saturday, January 26, 2013
Article comment by: Kathy despain

The state of IL for years has paid for things that they couldn't afford by not paying what they owed in to the pensions. I warned Rep. Mautine that this would one day catch up with all of us. I, as a retired teacher, get tired of hearing that solving the pension problem will solve the money problems in the state. That's absolutely untrue. The state can take away part of my pension this year and they will have the same problem next year. It is a problem of not having enough money coming in. We need a new tax system and until we get it we will always have this problem. I paid my share and followed all the rules. I didn't make a huge salary when I was teachingand I don't have a huge retirement income. Now, the state wants to screw up my retirement because they have been irresponsible for years. Give me a break!

Posted: Saturday, January 26, 2013
Article comment by: Anonymous46422

“It is estimated that the failure to address the state’s pension liability is costing the state at least $17 million per day, plus these downgrades continue to make borrowing additional funds even more expensive." ~ How can our legislators sleep at night knowing that Illinois residents are burdened with this hemorrhage of financial loss??? By running for office, they have accepted the responsibility of addressing this issue . . . NOW!!!

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