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Pension impasse leads to another downgrade to state's credit

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OIL_DRILLING_ILLINOIS_NEXT_STEPS_39495341.JPGGov. Pat Quinn, pictured in this April 17, 2013 file photo, called Monday's downgrade of the state's bond rating "no surprise" after the House and Senate failed to pass a pension-reform package to his desk last week. (AP Photo/Seth Perlman, File)

SPRINGFIELD-Illinois' creditworthiness took another significant hit after a bond-rating agency Monday downgraded the state because of the legislative stalemate over passing a pension-reform package before lawmakers went home for the summer last week.

Fitch Ratings dropped its rating on the state's bonds from an "A" to an "A-" after House Speaker Michael Madigan (D-Chicago) and Senate President John Cullerton (D-Chicago) couldn't reconcile their differences on how to solve Illinois nearly $100 billion pension crisis.

"Today's downgrade is no surprise," Gov. Pat Quinn said in a prepared statement. "As I have repeatedly made clear to the General Assembly, this will continue to happen until legislators pass a comprehensive pension reform bill, and put it on my desk.

"Every time the General Assembly misses the deadline, Illinois' credit rating is downgraded, which hurts our economy, wastes taxpayer dollars and shortchanges the education of our children," the governor said.

"If I could issue an executive order to resolve the pension crisis, I would have done it a long time ago. But I cannot act alone. Legislators must send me a bill to get this job done," the governor said.

Quinn intends to convene meeting Tuesday with Cullerton and Madigan to talk pensions. The governor has not closed down the possibility of ordering lawmakers back to Springfield for a special session this summer, but a similar move last August yield nothing but futility.

In a statement explaining its action against the state, Fitch put the blame squarely on the legislative stalemate over pensions and attached a "negative" outlook to the state's financial picture.

"The downgrade reflects the ongoing inability of the state to address its large and growing unfunded pension liability, most recently through the failure to pass pension reform during the regular legislative session that ended May 31, 2013," the company said.

"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," Fitch said.

Last week, Moody's Investor Services warned it could further punish Illinois if there wasn't a pension deal. Illinois has had the poorest credit rating of any state by Moody's measure since January 2012.

The coalition of public-sector unions that fought against a Madigan-backed pension package that passed the House but failed in the Senate put the blame for Monday's downgrade on the speaker's shoulders, calling him out for not allowing a vote on a Senate-passed pension plan backed by the unions.

"Today's downgrade was totally avoidable. Before it adjourned, the House could have passed Senate Bill 2404 -- a fair, constitutional, comprehensive pension funding solution," the We Are One Illinois coalition said in its statement. "Instead, Speaker Michael Madigan pushed SB 1, an unconstitutional bill that would have saved nothing and done nothing to help the state's credit rating once overturned. An overwhelming, bipartisan majority of state senators saw through SB 1 and voted to reject it twice."

The unions said the House "must now finish its work" and pass the Senate pension plan that remains bottled up in the House Rules Committee, which Madigan tightly controls.

A Madigan aide dismissed the criticism from the coalition, which is made up of the Illinois AFL-CIO, Illinois Education Association, Illinois Federation of Teachers, AFSCME Council 31 and others.

"When people fail to accomplish something, they usually find a bogeyman to blame. It's not unusual," Madigan spokesman Steve Brown told the Chicago Sun-Times. "As you know, the proposal they supported had practically no real savings associated with it and offered no protections against a lengthy court challenge."

The unions affiliated with the We Are One Illinois coalition pledged they wouldn't wage a legal fight against the Senate-passed pension plan. A smaller group, the Illinois Retired Teachers Association, warned that with a $100,000 legal fund, it might sue to block the Senate plan.

"Everybody knows it would be the same level of litigation over both proposals," Brown said.

Brown said he saw no purpose in having lawmakers return to Springfield for a special session to deal with pensions, unless the governor, Madigan and Cullerton all were on the same page.

"I think anything without some kind of agreement would look very much like the Rod Blagojevich era, and nobody is interested in that," Brown said, alluding to the three dozen special legislative sessions the ex-governor ordered while in office to deal with stalemates over the state budget and a construction program.

Brown also questioned the value of the bond-rating firms' opinions.

"Most people wonder why these guys are still in business. They're part of why the national economy collapsed, including the pension systems," he said.

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