Fitch has downgraded the state of Illinois’s credit rating one notch to A- after legislators were unable to pass public pension reforms last week.
“Fitch believes that the burden of large unfunded pension liabilities and growing annual pension expenses is unsustainable, and that failure to achieve reform measures despite the substantial focus on this topic exacerbates concern about management’s willingness and ability to address the state’s numerous fiscal challenges,” says a statement from the credit rating agency.
Illinois’s long-term liabilities, particularly pension liabilities, are very high for a U.S. state, Fitch notes.
The June 30, 2012, actuarial valuation stated that the unfunded liability was $94.6 billion, resulting in a 40.4% funded ratio. That liability is growing by about $17 million a day.