Credit Houses Voice Concern About Illinois’ Fiscal Health
Credit ratings agencies have taken notice of the circuit court ruling last Friday that tossed out Illinois’ law reducing workers’ pensions. But they’re not worried enough to lower the state’s rating.
Ted Hampton is with Moody’s Investor Service, which issued a note calling the decision “credit negative.”
“We do get a lot of inquiries about states, particularly Illinois where there are problems that are in the news, and where the situation is in flux”, said Hampton. “And publishing these comments helps us get our opinion out to those investors, or to the general public.”
But Hampton says the “credit negative” label does not mean Illinois’ actual rating will go down soon.
He says ratings agencies will continue to watch to see how the state Supreme Court views the law.
Meanwhile, Fitch Ratings says it hadn't factored savings from the pension fix into credit projections, because a legal challenge had always been anticipated. But the ratings agency says it's more concerned about the prospect that Illinois’ four-year, temporary income tax expires in January. That would blow a $2 billion hole in the state budget.
Poor credit ratings can mean it costs more to borrow money. And Illinois’ credit rating is already below any other state in the U.S.
Additional reporting from The Associated Press