Moody’s and Fitch downgraded the State of Illinois in their credit ratings. The downgrade was because “the state took no steps to implement lasting solutions to its severe pension under-funding or to its chronic bill payment delays. Failure to address these challenges undermines near- to intermediate-term prospects for fiscal recovery. It remains to be seen whether the state has the political willingness to impose durable policies leading to fiscal strength….”
To put things into perspective, Moody’s already ranks Illinois 50th among the states while Fitch ranks it as 49th state. Moody’s A2 ranking places it even with Botswana, a southern African nation that is 70% desert.
This is the 11th downgrade since 2009. The Democrats, who control the state legislature and the governor’s mansion, are unwilling to fix the state’s hemorrhaging pension system and curb union power. Neighboring states like Wisconsin, Indiana and Michigan have challenged the unions on pension reform or embraced right-to-work laws to encourage economic growth. Illinois remains committed to big labor and it is costing the state dearly unlike these other states.
Illinois has $54 billion in unfunded liabilities for retiree health insurance and $15 billion in pension bonds. It is expected that Governor Pat Quinn will seek a federal bailout. This would be a disaster because it rewards reckless financial management and punishes those states that have managed their finances responsibly. This is why some financial experts are comparing Illinois to Greece. Illinois and California are to the US the way Greece is to the European Union.
The Illinois Policy Institute has warned that Illinois’s situation is where the United States is headed under Obama because of his failure to rein in spending and the mounting debt and deficit. The only difference between Illinois and Washington, D.C. is that Illinois cannot print money or borrow it like Obama and the Federal Reserve.
Only major reforms of the entitlement can get the problem under control; however, the Democrats are “kicking the can down the road” in anticipation of a federal bailout. As such, “it is a failure of leadership” to quote Obama and the Democrats cannot blame the Republicans for this economic fiasco because Illinois has been the bluest of blue states for the last decade. It is a warning liberals either will ignore or deny exists because that is their pattern.