Moody’s puts Illinois in top 5 in debt, pension needs

By Kathy Bergen
Posted Jan. 27 at 9:41 a.m.

Illinois’ fiscal woes have translated into another dubious distinction for the state: A newly released analysis by Moody’s Investors Service ranks Illinois among the five states with the highest debt and pension funding needs.

Connecticut has the greatest funding needs, followed by Hawaii, Massachusetts, Mississippi and Illinois, Moody’s found.

Moody’s looked at each state’s combined pension and long-term debt as a percentage of personal income, gross domestic product and state revenue, and calculated its debt per capita. Illinois’ combined pension and debt burden translates to $6,692 per person, fifth highest in the country.

The Moody’s report examined states’ combined taxpayer-supported debt and pension liability figures  to present a clearer picture of a state’s liabilities. The report comes at a time when municipal bond markets are rattled by many states’ fiscal woes.

Previously, the bond rating agency had looked at outstanding bond debt and pension liabilities separately.

“Given the fiscal stress being felt by most states and the prospects for sluggish economc growth and slow revenue recovery, pension funding pressures will continue to have a negative impact on state credit quality and state ratings,” the Moody’s report stated.

The revised analysis appears unlikely to affect Illinois’ credit rating.

“For some states, such as Illinois …  large and growing debt and pension burdens have already contributed to ratings changes,” the report stated.

After several downgrades in the last year, Illinois general obligation bonds are rated A1, with a negative outlook, by Moody’s. This is the lowest among the 50 states.

This report comes on the heels of disclosures that the Securities and Exchange Commission is conducting an inquiry into Illinois’ projections about savings expected from the creation of a two-tiered pension system last spring.
The inquiry, which began in September, was disclosed in the state’s preliminary documents related to the planned sale Feb. 17 of $3.7 billion in pension obligation bonds. Proceeds would fund the state’s pension contributions for this year.

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  1. John Jan. 27 at 11:23 a.m.

    These pensions are comical already. How long before Illinois completely shuts down as a result of being out of cash?

  2. jack (me) Jan. 27 at 2:02 pm

    Quinn is peeved. Illinois should always be #1 in his book.

    John, with regard to Illinois completely shutting down, add into this the SEC probe of the pension bonds, the “Jobs Now” bill being ruled unconstitutional, and the legislature’s inability to get a 60% vote for bonding out the increased income tax, meaning that vendors will still not be paid.

    However, Quinn will, in all cases, roll out his press secretary to say that everything is fine. In fact, with respect to the “Jobs Now” bill, he said so himself.

  3. gery b Jan. 27 at 8:49 pm

    Gov Jelly will now once again bring out his tired lines of “doing the right thing”, blaming the Repubs for not “coming to the table in a true bipartisan fashion”, telling us we “in the Land of Lincoln” have to once again sacrifice for another “temporary tax increase” to make up for the “court overstepping its bounds”, so we can “meet our pension obligations for those who have provided us their public service” and “create the infrastructure needed to move us into the 21st century”, blah, blah, blah….

    Call me when he’s done. I’ll be moved out of state by then.

  4. eaglemusky Jan. 27 at 10:11 pm

    Muni-bonds are a $2.9 trillion market.

    The Wall Street Journal stated “Federal regulator’s power in this realm is limited because municipal borrowers are unregulated”. The article is titled “Bondholders Left In the Dark”, dated January 26, 2011.

    This disclosure floored me.

    Union sponsored politicians from certain states have set the world standard for moral bankruptcy—they pay union pension funds, and union pension funds pay them (campaign funds). This activity is funded mainly by the sale of muni-bonds to small investors who do not have proper disclosures.

    It is time for the SEC to wake up and smell the coffee!