Pension costs for state government workers reached an all-time high in 2016, consuming 25 percent of the state’s general budget.1 Today, more than $8 billion of the state’s yearly $32 billion budget goes to pay for pension costs, sapping tremendous amounts of money from social services for the developmentally disabled, grants for low-income college students, and aid to home...View Report
The New York-based credit agency cited the lack of action on a budget as the primary reason for the downgrade.
Standard & Poor’s sent Chicago Public Schools’ credit rating deeper into junk territory in the wake of the new $9.5 billion teachers’ contract. The ratings firm said the new contract will make the district’s financial crisis worse.
The ratings agency cited the city’s “considerable growth” in pension debt in its Oct. 28 downgrade to A3 from A1.
The ratings agency also warns that another downgrade could be coming if the state doesn’t enact serious reforms to improve its fiscal condition.
Another credit downgrade shows borrowing, taxes and bailouts can’t fix CPS’ financial crisis, but real structural reforms are needed.
Major ratings agencies have assigned a negative outlook to Illinois. To move forward, the state can’t pass just any budget – especially one that’s $7 billion out-of-whack – to get beyond its crisis. With today’s fiscal stress, a bad budget is worse than no budget. A budget without reforms will only allow Illinois’ debt to continue to spiral, putting investors – and more importantly, Illinois residents – at risk.
The city’s rating from Fitch is now just one notch above junk status.
The district’s borrowing does take pressure off of the district’s immediate cash-flow problem. However, it does nothing to solve the CPS’ long-term financial crisis and its structural imbalances – in fact it only makes things worse.
Illinois paid $53 million more to borrow money through its Jan. 14 bond sale than it would have paid had politicians not let the state’s debt and government-worker pension obligations spiral out of control, while driving out taxpaying residents and businesses through tax hikes and costly regulations.
Standard & Poor’s Ratings Services issued a two-notch downgrade to the Chicago Board of Education on Jan. 15, citing failure to address the district’s structural financial problems.