I have designated Governor Quinn of my homestate of Illinois the worst governor in the country. Not content to rest on his laurels, Governor Quinn has continued to misgovern the Land of Lincoln with the skill of a spendthrift who is afraid that he has a cent somewhere that remains unspent. Such diligence will always reap a reward, and one has now come to Quinn:
Illinois, unable to solve its long-running financial problems, was given the lowest credit rating of any state in the country by Moody’s Investors Service on Friday, a move that will increase costs to taxpayers.
A second agency, Standard & Poor’s, left its Illinois rating unchanged but warned of a negative outlook that could lead to a downgrade in the future. A day earlier, Fitch Ratings also left the rating unchanged and declared a stable outlook.
Lower credit ratings generally mean the state winds up paying more interest when it borrows money by selling bonds.
Both Moody’s and S&P said they are troubled by Illinois’ failure to balance its budget and strengthen government pension systems, although a tax increase and other measures have helped.
Moody’s cited “weak management practices” and a recent legislative session that “took no steps to implement lasting solutions.”
Moody’s now rates Illinois “A2,” below any other state. Only one state, California, qualifies for the next-highest rating. All the rest are ranked higher. Continue reading
When the clueless New York Times, fishwrapper of record, notices something, you can rest assured that, after you extract the political spin, they are merely restating the obvious, and so it is today:
Policy makers are working behind the scenes to come up with a way to let states declare bankruptcy and get out from under crushing debts, including the pensions they have promised to retired public workers.
Unlike cities, the states are barred from seeking protection in federal bankruptcy court. Any effort to change that status would have to clear high constitutional hurdles because the states are considered sovereign.
But proponents say some states are so burdened that the only feasible way out may be bankruptcy, giving Illinois, for example, the opportunity to do what General Motors did with the federal government’s aid.
Beyond their short-term budget gaps, some states have deep structural problems, like insolvent pension funds, that are diverting money from essential public services like education and health care. Some members of Congress fear that it is just a matter of time before a state seeks a bailout, say bankruptcy lawyers who have been consulted by Congressional aides. Continue reading