Cook County, home to Chicago, had the rating on $3.7 billion of general-obligation bonds cut one level to A1 by Moody’s Investors Service because it faces “formidable hurdles” in fixing its pension system.
The county of 5.2 million, the second-most-populous in the U.S., is the latest issuer in Illinois to have its rating cut by Moody’s. The rating company reduced the state’s rank in June to A3, and last month dropped Chicago’s grade three steps to A3. The outlook on all three is negative.
Cook County’s downgrade “reflects the formidable hurdles facing the county in its quest to pursue meaningful pension reform,” Moody’s said today in a statement. Changes to the systems must be enacted by the state, which is faced with its own “legislative paralysis,” the company said.
Illinois lawmakers failed to restructure pensions saddled with almost $100 billion in unfunded liabilities before the legislative session ended May 31. They also didn’t act in special sessions called by Democratic Governor Pat Quinn in June and July.
Illinois’s five state pension systems had 43 percent of assets needed to cover obligations in fiscal 2011, the lowest ratio among U.S. states, Bloomberg data show. Quinn, 64, has said finding a fix “has confounded legislatures and governors for 70 years.”
“Today’s downgrade is the direct result of the pension crisis we face and our inability to act without state legislation,” Owen Kilmer, a spokesman for County Board President Toni Preckwinkle, said in an e-mailed statement. “We will continue to be negatively affected by the state’s lack of attention to local pension funds.”
About half of the county’s tax base includes Chicago, the third-most-populous U.S. city.