CHICAGO, Dec 13 (Reuters) - Illinois' public pension funding problems, likely to persist if not worsen, led Moody's Investors Service on Thursday to revise the state's credit outlook to negative from stable, putting more pressure on state lawmakers to act.
Illinois' finances are buckling under a $96.8 billion unfunded pension liability while Governor Pat Quinn and various state lawmakers are pushing to get various reform measures passed by the legislature in early January.
But Moody's, which affirmed Illinois' A2 rating, said the passage of any reforms stands a good chance of being challenged in court on the basis of strong state constitutional protections for pension benefits.
"Political pressures, coupled with the threat of litigation, may mean that any reforms enacted have only a marginal effect on liabilities," Moody's said in a statement.
In the meantime, the state's problems could be exacerbated by the partial expiration of income tax rate increases in fiscal 2015, leaving the state with a lower revenue base while pension payments escalate, according to the rating agency.
Abdon Pallasch, Illinois' assistant budget director, said the outlook revision underscores the need for comprehensive pension reform.
"Every day that goes by without action, the pension problem gets worse," he said. "As Governor Quinn has repeatedly warned legislators, sky rocketing pension costs are eating up critical services like education and public safety more and more every day."
Moody's warned that Illinois could face a rating downgrade if pension funding deteriorates further, the state fails to make a required and complete pension payment or enacts reforms that have a limited impact on its pension liabilities.
At A2, Illinois' credit rating is the lowest among states that Moody's rates.
A bipartisan proposal that surfaced in the Illinois House last week would boost workers' pension contributions, raise retirement ages and limit cost-of-living increases for retirees with the aim of fully funding pensions in 30 years.
The plan would also gradually shift pension payments currently made by the state to local schools districts, universities and colleges.
Illinois has skipped or skimped on pension payments for years, leaving it with the lowest funded ratio among states. That ratio fell to 39 percent at the end of fiscal 2012 from 43.3 percent, with both well below the 80 percent level considered healthy.
Support HuffPost
Our 2024 Coverage Needs You
Your Loyalty Means The World To Us
At HuffPost, we believe that everyone needs high-quality journalism, but we understand that not everyone can afford to pay for expensive news subscriptions. That is why we are committed to providing deeply reported, carefully fact-checked news that is freely accessible to everyone.
Whether you come to HuffPost for updates on the 2024 presidential race, hard-hitting investigations into critical issues facing our country today, or trending stories that make you laugh, we appreciate you. The truth is, news costs money to produce, and we are proud that we have never put our stories behind an expensive paywall.
Would you join us to help keep our stories free for all? Your contribution of as little as $2 will go a long way.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
As Americans head to the polls in 2024, the very future of our country is at stake. At HuffPost, we believe that a free press is critical to creating well-informed voters. That's why our journalism is free for everyone, even though other newsrooms retreat behind expensive paywalls.
Our journalists will continue to cover the twists and turns during this historic presidential election. With your help, we'll bring you hard-hitting investigations, well-researched analysis and timely takes you can't find elsewhere. Reporting in this current political climate is a responsibility we do not take lightly, and we thank you for your support.
Contribute as little as $2 to keep our news free for all.
Can't afford to donate? Support HuffPost by creating a free account and log in while you read.
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. Would you consider becoming a regular HuffPost contributor?
Dear HuffPost Reader
Thank you for your past contribution to HuffPost. We are sincerely grateful for readers like you who help us ensure that we can keep our journalism free for everyone.
The stakes are high this year, and our 2024 coverage could use continued support. If circumstances have changed since you last contributed, we hope you’ll consider contributing to HuffPost once more.
Support HuffPostAlready contributed? Log in to hide these messages.