| Illinois slips below California in Moody's credit ratings
by Brian Leubitz
Sometimes you just have to celebrate small, even microscopically small achievements. I think this would be one of those small ones:
After being stuck in the ratings basement since 2009, California's credit rating now ranks better than Illinois, according to Moody's Investors Service. Illinois was slapped with an A2 rating last week, worse than California's A1. Moody's penalized Illinois for unresolved pension liabilities and delayed payments. (SacBee)
Hooray, we're #49 in one of the three major credit ratings. Of course, much of this discussion is baloney for a number of reasons. As Robert pointed out in 2010, we actually have a much lower debt to GDP ratio than any of the European countries of concern. It is currently hovering around the 5% mark, hardly crisis levels.
And then there is the underlying guarantee enshrined in our Constitution. As Treasurer Lockyer wrote in the LA Times:
California has never failed to make its bond payments on time and in full, not even during the Depression. And there is no chance we will smudge that pristine record.
Payment of debt service is constitutionally protected, with bond payments required even when the state is operating without a budget. Debt service has second call on general fund dollars, right behind education. Under the California Constitution, making sure bond investors get their money is a higher priority than providing healthcare to kids, protecting the environment and keeping our communities safe.(LA Times)
But you know, the credit rating agencies have their own priorities, shock doctrine and all that.
Hooray for #49!