Illinois Debt Cut by S&P After Pension Inaction

Illinois, the U.S. state with the worstfunded pension system, had the rating on its general-obligation debt cut one level by Standard & Poor’s and may face more downgrades.

The change to an A rating followed state lawmakers’ failure to agree to reduce retirement costs during a special session Aug. 17. The outlook for the state’s debt, which now has S&P’s sixth-highest grade, is negative. California, with an A-ranking, one level below Illinois, remains S&P’s lowest-rated state.

Illinois has an unfunded pension liability of at least $83 billion, according to state figures. It had 45 percent of what it needed to pay future retiree obligations as of 2010, the lowest among U.S. states, data compiled by Bloomberg show.

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