The Illinois Legislature will shore up the state’s underfunded pension system when it meets after the November elections, having failed to do so in August, the head of a Chicago-based watchdog group predicted.
“There’s a lot of lame ducks that will be looking for jobs and will be looking to leadership in exchange for their vote,” Ralph Martire, executive director of the Center for Tax and Budget Accountability, said today at the State & Municipal Finance Conference hosted by Bloomberg Link in New York. “We call that session in Illinois the chicanery session, and that’s when a lot of things happen.”
Illinois’s credit rating in August was reduced one step by Standard & Poor’s to A, the sixth-highest grade. The company said the move was partly the result of weak pension funding. With only 43.4 percent of what it needs to pay promised benefits, Illinois has the worst system among states, data compiled by Bloomberg show.
The pension is underfunded by $83 billion, said Martire, whose group says it promotes “fair, efficient and progressive tax, spending and economic policies.”
Altering retirement alone won’t solve the underlying fiscal crisis, he said. Illinois suffers from an outdated tax system, excessive borrowing and costs that outstrip revenue, Martire said.
Still, the state remains the nation’s fifth-largest economy and benefits from a resurgence in manufacturing, said Ted Hampton, an analyst at Moody’s Investors Service Inc.
He said Moody’s has downgraded Illinois’s rating four times in the past four years, making it the company’s lowest-rated state. Hampton said although the fiscal outlook is gloomy, “the state does have the ability to muster political willpower from time to time.”
Not in August. Lawmakers failed to act on the pension during a one-day session called by Democratic Governor Pat Quinn. They took no action on increasing employee contributions, passing costs to school districts and forcing workers to choose between the pension plan and free health care in retirement.