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Thu May 15, 2014
Rating Agencies Not Worried About Pension Hold
Illinois' pension overhaul might be on hold, but credit ratings agencies say they're not concerned. A Sangamon County judge Wednesday ruled that reductions to public employees' retirement benefits will not go into effect next month, as planned.
When lawmakers were considering significant reductions in pension benefits, among the most talked-about reasons were consistent warnings and downgrades by credit rating agencies. After the legislation was signed into law, the downgrades stopped.With the law now on hold -- you might think the credit rating agencies are getting nervous. Not so. Both Standard & Poors and Fitch issued bulletins saying the temporary hold does not pose a credit concern. At least, not immediately.Because according to Democratic Rep. Elaine Nekritz of Northbrook, who helped craft the pension bill, legislators weren't counting on the savings for this year, anyway. "It doesn't impact the budget that's being passed as we speak, or in the next couple of weeks," Nekritz said. The pension law's long-term survival, though, remains a concern for the ratings agencies. A lawsuit challenging its constitutionality is ongoing. Illinois already has the lowest credit rating of any state. Meanwhile, universities say they've seen higher numbers of retirements than usual ... due to concerns the pension law would cause workers who are eligible for retirement to forgo thousands of dollars in benefits if they continued working. In a letter to employees, University of Illinois President Bob Easter says now that the law is on hold ... he hopes faculty who'd been weighing retirement because of the expected pension changes will instead decide to stay on.