The Pantagraph

Bond-rating drop should push politicians to act

Sunday, June 13, 2010

The drop in rating Moody’s Investors Service gave to Illinois’ general obligation bonds should be a wake-up call to seriously address the state’s financial problems.
Instead, politicians are hitting the snooze button and the nightmare continues for Illinois residents.
There continues to be no sense of urgency among the state’s politicians — other than the urgency of many lawmakers to get out of Springfield and hit the campaign trail and dump the mess in Gov. Pat Quinn’s lap.
We are still waiting to hear what Quinn plans to do and we are still waiting to see the rest of the Legislature — including state Sen. Bill Brady, R-Bloomington, who is running for governor — step up to the plate and work with Quinn to get this figured out.
The stalling and finger-pointing has to end now, not after the election. We are out of time.
Quinn focused on Moody’s reference to the state’s financial situation stabilizing a big positive — but there were far more negatives than positives in Moody’s report.
Moody’s noted that a reliance on one-time fixes, rather than long-term changes, noting “the legislature’s failure to enact recurring budget-balancing measures is consistent with recent years, when infighting between the exceutive and legislative branches caused budget delays and allows both the erosion of the state’s finances and the widening of severe pension funding gaps.”
The report also noted, “This failure underscores a chronic lack of political will that indicates further erosion of an already weak financial position.”
We couldn’t have said it better ourselves. These are not mere words; bond ratings have an impact — and it can be a costly impact.
Generally, when a bond rating is dropped — from Aa3 to A1 in this case — it is more costly to sell bonds. And Illinois is counting on selling bonds — borrowing money — to address its immediate problems.
We do agree with one thing a Quinn spokeswoman said: Moody’s action shows why it’s important for the Legislature and governor to work together on the budget.
As noted in the Moody report, “The longer solutions to the state’s challenges are deferred, the more difficult they will become to implement.”
It’s ironic that it will most likely be costlier to borrow money because, among other things, the state keeps borrowing money instead of directly addressing its financial deficit.
The answer to shoring up the state’s bond rating and its finances is the same: Get spending under control and the bond rating will improve and there won’t be as great a need to borrow.