The Civic Committee of the Commercial Club of Chicago has been trying to destroy Illinois in order to save it, by talking down the state’s bond rating to create public pressure for pension reform. Here’s the video of Civic Committee president Tyrone Fahner describing how he and his colleagues did it, in a speech at the Union League Club.
Unidentified Questioner: “Maybe sometimes you’ve got to be irresponsible to be responsible, and if a political solution really doesn’t produce a favorable outcome, maybe you really need a market solution, and a market solution, I don’t mean bankruptcy, I mean, actually talking down the state rating even further, so the state’s bonds essentially become below investment grade, and it drives up the borrowing costs for the states, and all of us to a significant level enough that you really feel the public pressure. I mean, that’s somewhat irresponsible, but in the end, the rating agencies that can lower sovereign debt, you can see Europe going through the same scramble, is that there has to be a market pressure that is overwhelming. The market pressure is that our bonds, here they’re the 50th rated out of 50 states, but still haven’t gone lower to where they’re actually below investment grade.”
Fahner: “The Civic Committee, not me, but me and some of the people who make up the Civic Committee, some of the same names I mentioned before, did meet with and call, in one case it was in person, a couple of calls to Moody’s, Fitch and Standard & Poor’s, and say, ‘How in the hell can you guys do this? You’re an enabler to let the state continue. You keep threatening more and more and more, and I think now we’ve backed off, because we don’t want to be the straw that breaks the back, but if you watch what happened over the last few years, it’s been steadily down. Before that, it’s been the blind eye, and that’s a different topic, about how the rating agencies act and don’t act. That’s more in your field and stuff. It has been irresponsible. We have told them that we thought they were being irresponsible, but we stopped that a couple months ago.”
Fahner and the Civic Committee are enemies of public employee unions. Last year, they backed a constitutional amendment that would have required a three-fifths vote for governments to increase public pensions. In an interview with Ward Room last year, Fahner, a former Republican attorney general, called Illinois “a blue state…dominated by the unions.” The questioner suggested that if the Civic Committee couldn’t achieve its goal of reducing public employee pensions at the ballot box, its members should use their financial influence to do an end-run around democracy.
They may have stopped, but on June 6, Moody’s downgraded Illinois’s credit rating from A2 to A3, the lowest in the state’s history, and the lowest in the nation.
“Our rating now assumes the government will not take action to reduce the state’s pension liabilities any time soon,” Moody’s said at the time. “The legislature’s political paralysis to date shows not only the magnitude of Illinois’ unfunded benefit liabilities, but also the legal and political hurdles to legislation that would make pensions more manageable long term.”
I don’t think Illinois needs any help in downgrading its bond rating. Fahner seems to have figured that out.