June 7, 2013
SPRINGFIELD, IL — Whammed by Illinois’ second credit-rating downgrade this week because of the pension debacle, Gov. Pat Quinn moved swiftly Thursday to call lawmakers into a special session “to finish their job” after adjourning the spring session last week without a resolution.
The Democrat’s announcement came just minutes after Moody’s Investors Service downgraded the state’s credit worthiness to A3 from A2 — seven levels from the best grade and four stages above “junk” status.
It was the second time in less than a week that a major assessor of Illinois’ $27 billion in outstanding bond indebtedness knocked the state’s rating down a level because of inaction on closing a $97 billion shortfall in five public-employee pension programs. Such downgrades cost the state millions of dollars in interest on bonds.
“Time and time again over the past two years, I have proposed, asked and pushed members of the General Assembly to send me a comprehensive pension reform bill,” Quinn said in a prepared statement. “Time and time again, failure to act by deadlines has resulted in the bond rating agencies lowering our credit rating, which hurts our economy, wastes taxpayer money and shortchanges the education of our children.”
Bringing the Legislature together often opens the door to other action. The May 31 adjournment left several issues unresolved — gambling expansion, legalized gay marriage — and resulted in an unsteady House-Senate agreement answering a court’s order to enact provisions for carrying concealed weapons.
House administrators already had discussed June 19 for a return to override an expected Quinn veto of the concealed-carry measure, according to Steve Brown, spokesman for House Speaker Michael Madigan. Quinn spokeswoman Brooke Anderson said the governor hadn’t decided what to do with that bill.
But passing legislation between June 1 and December 31 requires a three-fifths vote in both chambers, so it’s hard to see how a pension deal rejected in May could pass now, let alone pacts on gay marriage or a contentious gambling package.
Quinn said he had contacted Madigan and Senate President John Cullerton about the pension session. Anderson confirmed there is no deal, but said there’s time to seal one before lawmakers ride back into town.
Madigan and Cullerton — both Chicago Democrats, like Quinn — adopted differing plans to catch up over 30 years on the debt after decades of state underfunding of employee retirement programs, but neither proposal got approval in the opposite chamber.
“Moody’s provides more damning evidence that we can’t afford a continual stalemate on pensions,” Cullerton spokeswoman Rikeesha Phelon said.
Moody’s tagged its downgrade to legislative indecision.
“Our rating now assumes the government will not take action to reduce the state’s pension liabilities any time soon,” the Moody’s statement said. “The Legislature’s political paralysis to date shows not only the magnitude of Illinois’ unfunded benefit liabilities, but also the legal and political hurdles to legislation that would make pensions more manageable.”
It was a similar story on Monday, the first business day after the General Assembly’s curtain, when Fitch Ratings dropped its score from “A” to “A-”.
A third agency, Standard & Poor’s, said Thursday that it would keep its mark at “A-” for now because when it last issued a downgrade in January, it predicted action this spring “was unlikely given the poor record of the past two years and the lack of consensus on a plan.”
Downgrades cost Illinois millions of dollars extra in interest costs when officials sell government bonds to raise money, primarily for long-term construction projects. Such bonds, backed by general tax revenue, are still highly stable investments, but such high debt makes markets jittery.
Cullerton and Madigan differ on a pension approach. Cullerton worries about complying with the Constitution’s restrictions on diminishing promised pension benefits, so his idea would reduce perks but would give workers a choice on which to forgo. Public-employee labor unions back it.
Madigan believes his plan would meet a court challenge because it would save the pension framework and that his proposal saves sufficient money, while Cullerton’s would not.
Senate Republican Leader Christine Radogno of Lemont questions whether “dynamics” had changed sufficiently to justify a special call.
“Clearly there is a rift (among) Democrat leaders,” Radogno said. “Despite their supermajority status, they missed a prime opportunity to enact comprehensive pension reform.”
Copyright 2013 Associated Press
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