Illinois postponed a $500 million bond offer yesterday after Standard & Poor’s (MHP) lowered the state’s rating to A- last week, with a negative outlook. Pensions are the problem. Illinois is supposed to save enough money for its state employees. It has not. Also, the state assumed unrealistic investment returns on the money it did save. At the end of 2012, S&P reports, Illinois was almost $100 billion short on what it already owes its employees for retirement, and the state legislature is incapable of making changes to what the state will owe future employees.
Meanwhile, in New York, a state that’s been more responsible with its pension program, the state comptroller, city mayors, and investors are arguing over Governor Andrew Cuomo’s plan to allow cities to cash in now on expected future savings on pension reforms enacted last year for employees who haven’t been hired yet. “This is a financing plan to get you from today to tomorrow,” Cuomo told Bloomberg News.