Rockford receives credit downgrade as pension debt grows
As pension debt mounts, Moody’s Investors Services has downgraded the city of Rockford to an A2 rating.
Illinois’ credit may be verging on the edge of junk status, but the state isn’t the only government facing scrutiny from the major ratings agencies. The city of Rockford received a credit downgrade July 5 from Moody’s Investors Service to an A2 rating from A1.
Moody’s attributed the downgrade to Rockford’s high pension burden that will “continue to grow, weakening operating reserves and available liquidity.” Moody’s also chalked up the downgrade to Rockford’s struggles to generate revenue and above average debt burden.
City officials in Rockford blamed the credit rating on a lack of “home rule,” a debate dating back to the 1980s when Rockford residents voted to strip the municipal government of some powers such as the ability to easily raise taxes after lawmakers repeatedly increased property taxes. Rockford lawmakers cite that as the cause of the revenue shortage.
In a statement to the Rockford Register Star, Rockford Mayor Tom McNamara said, “We expected a change in [credit] rating, as we know the financial challenges faced by the city are severe.”
Rockford does indeed face severe challenges, as Illinois Policy Institute research from 2014 indicated that Rockford’s pension debt was already among the worst in the state.
Since 2003, debt levels for public pensions in Rockford have doubled, with the average household being on the hook for more than $4,000 in debt and Rockford’s high pension costs consuming more than a third of total city revenue collected from property taxes, per an Illinois Policy Institute report.
While lawmakers in Rockford blame a lack of revenue for the city’s mounting debt and financial woes, it’s systemic pension problems that are the real issue.
Spending issues, not revenue issues, plague Rockford, much like Illinois. Illinois is already home to the highest overall tax burden in the nation. Higher taxes are not the solution to Rockford’s pension crisis. Rather, Rockford should look to enact real reforms to cut spending, like moving new Rockford employees to 401(k)-style retirement plans rather than costly and underfunded pension plans.