SEC Investigates Illinois
All is not well in the Land of Lincoln. The state’s governor’s office confirmed this week that the Securities and Exchange Commission (SEC) has launched an inquiry into public statements by Illinois officials concerning the state’s underfunded pension fund.
The inquiry is focused on public statements concerning an overhaul measure passed in 2010 meant to help shore up the retirement system, said the governor’s spokeswoman. Robert Kurtter, a managing director in the public finance division at Moody’s Investors Service, said an issue being examined is whether Illinois was taking future savings and treating them as current reductions in the cost of the pension fund. Kurtter, who said his firm spoke with Illinois officials about the inquiry, mentioned one of the measures that Illinois took to save costs was to raise the retirement age for newly hired Illinois workers.
Illinois is ranked worst in the nation when it comes to setting aside enough money for its pensions, according to the Pew Center on the States.
According to governor’s spokeswoman, Illinois is preparing for the sale of approximately $3.7 billion bond, expected in the next few weeks and has included mention of the SEC inquiry in documents. The debt is anticipated to allow the state to make a required pension-fund contribution.
Illinois' bond rating is below that of any other state. The state has a lower bond rating than all but seven sovereign countries, ranking just a bit higher than Iraq.
Illinois was informed by the SEC of the inquiry in September, said the governor’s spokeswoman. The inquiry is the latest instance of the SEC probing into a state’s financial disclosures related to pensions. Currently, the SEC lacks the authority to require issuers to disclose financial information before selling debt in the muni-market, however, SEC Commissioner Elisse Walter has said the agency has anti-fraud authority and authority over the professionals that deal in the marketplace.
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