Budget, pensions straining Illinois finances

Jul 23, 2014

Wall Street's view of Illinois' financial health has taken a hit, thanks largely to the state budget that took effect at the start of this month.  As IPR’s Amanda Vinicky reports, pensions also continue to be a drag.

When Illinois Democrats passed the state's latest budget, many seemed to hold their nose. Credit ratings agencies are more direct. Standard & Poor’s has revised Illinois' credit outlook to "negative."

It says the new budget "is not structurally balanced and will contribute to growing deficits." Translation: Illinois is spending money it doesn't have. The state income tax rate is set to drop at the end of the year, costing billions in revenue. And yet the budget does not contain billions in cuts;  instead relying on one-time fixes to get by.

The S&P report also highlights a recent Illinois Supreme Court decision that said retirees' free healthcare premiums are a protected part of their pension package. Many observers say that doesn't bode well for Illinois' comprehensive pension overhaul, which is facing its own court challenge.

If that pension law is declared invalid, the S&P analysts write "we believe there could be a profound and negative effect on Illinois' budgetary performance."