Illinois may find itself with a bit of good news in the wake of the recently signed pension reform bill: a better credit rating.
Standard & Poor's affirmed its A- rating on state debt backed by general tax revenue Tuesday but revised its outlook from "negative" to "developing." The change means the rating could be raised or lowered in the next two years.
Illinois currently has the worst credit rating of any state in the country, due in large part to it’s $100 billion in unfunded pension obligations. Earlier this year, both Moody’s and Fitch, two Wall Street ratings agencies, downgraded the state’s credit rating.
Lower credit ratings translate into millions of dollars in higher borrowing costs, while repairing the state’s credit could save money while providing a more favorable reception for bonds it wishes to sell. Illinois currently pays nearly 1.5 percentage points more than what the highest-rated states pay for 10-year bonds.
In June, for example, Illinois paid $130 million in extra interest payments on $1.3 billion in bonds it sold to pay for capital projects around the state.
The pension reform law reduces state workers' contributions to pensions but cuts their benefits in a 30-year plan to erase its retirement-account deficit.