For the second year in a row, the Illinois state legislature begins a new session with pensions at the top of the agenda. This isn’t because lawmakers have an overflow of ideas, but because all past attempts to fix the state’s pensions have gone nowhere despite strong pressure from the governor and single-party control of all branches of government. Last year alone, measures to put the state’s pension system on better footing (some of them quite modest) failed three different times in Springfield. When the regular session adjourned with nothing passed, Governor Pat Quinn called a special session to get something done; this effort also failed to achieve much of anything.Meanwhile, the state’s financial situation has steadily deteriorated. Its debt is already hovering just above junk status, Chicago’s has been downgraded, and now Bloomberg reports that investors are demanding record yields on the state’s bonds:
A wider yield spread shows investors are more pessimistic than in May, when Illinois debt rallied the most since 2011 on bets lawmakers would agree on a pension measure. Legislators have failed to enact a fix at least five times in the past 14 months. Over that period Illinois has become the lowest-graded U.S. state by the three biggest rating companies. Its A-rank from Standard & Poor’s, six below the top, is three levels above Puerto Rico’s.“Illinois’s backlog of unfunded liabilities just continues to get worse — there are no steps being made to stabilize the situation,” said Bart Mosley, co-president of Trident Municipal Research in New York. “Until you get beyond somebody having a plan, it’s very hard to change the outlook.
Surely, then, Illinois’ leaders recognize this is the biggest issue facing their state? No, some are still in denial. Last weekend, Senate President John Cullerton told one radio interviewer: “I don’t think you can use the word ‘crisis’ to describe it at the state level. It’s something we have to deal with, but it’s not something that we’re on the verge of bankruptcy on.”Illinois badly needs to turn things around before another year of inaction does more damage to its credit and makes it even more difficult to borrow. Unfortunately, given its long record of false starts it’s difficult to hope this time will be different.[State Capitol of Illinois image courtesy of Shutterstock]