By Joanne von Alroth
SPRINGFIELD, Ill. Jan 8 The Illinois
legislature adjourned on Tuesday without acting to restore the
health of the nation's most underfunded state pension systems,
risking another downgrade of its already low credit ratings.
After days of wrangling at the state Capitol of Springfield,
lawmakers ended their last meeting of a "lame duck" legislative
session without voting on a pension reform measure.
Majority Democrats, worried about opposition from labor
unions, realized they did not have enough support to pass a
reform proposal and decided not to vote on any measure.
Failure to act means that work to fix a pension shortfall of
$96.8 billion will have to start from scratch when a newly
elected legislature is sworn in on Wednesday.
Moody's Investors Service warned last month that without
action on the pension problem, it could downgrade the current A2
Illinois debt rating, the lowest among the states it rates. A
lower credit rating could increase the cost of borrowing.
The latest failure underscores the problems Illinois faces
in dealing with its "most pressing challenge," Moody's analyst
Ted Hampton said on Tuesday after the legislature adjourned.
"Each time the General Assembly has difficulty reaching a
consensus it seems to reinforce the idea this is a real steep
hill the state has to climb," Hampton said.
Standard & Poor's Ratings Services' downgrade of Illinois'
credit rating to A with a negative outlook in August reflected
in part the lack of action on pensions, S&P analyst Robin Prunty
said on Tuesday.
She added the progress on reforms will be a key factor for
the state's rating over the next year or so.
Warning of a credit downgrade and economic doom, Democratic
Governor Pat Quinn tried on Tuesday to push through a plan to
form a commission to recommend a fix to the pension problem.
Under his plan, the commission's recommendations would have
become law unless the legislature voted to reject them.
Dan Montgomery, president of the Illinois Federation of
Teachers, said the measure represented a "hail Mary" pass by
"It's a rather sad attempt to get something done," he said
during a House committee hearing on the measure.
Illinois state finances are buckling under the weight of
sizeable and growing annual pension payments that are siphoning
money for essential state services such as healthcare and public
Illinois is among a number of states and local governments
facing a financial crisis because they failed to adequately fund
their pension systems for years, especially during the Great
Recession in 2008-09, which hurt government revenues.
Legislation aimed at fully funding the Illinois pension
system in 30 years by boosting worker contributions, raising
retirement ages and limiting cost-of-living adjustments for
retirees failed to get enough support.
Labor unions, which are major contributors to the campaigns
of the majority Democrats in Illinois, strongly oppose the
proposal. They have threatened to challenge any changes to
pensions in court as unconstitutional. The Illinois constitution
has strong protections for pension benefits.