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.