The land of Lincoln needs a new nickname.

People had taken to calling it "the Deadbeat State" after it started issuing IOUs in lieu of payment to vendors and even lottery winners. But now you can also call it the Just-Above-Junk State.

Yesterday, Illinois missed its deadline for a new budget. Today, responding to that failure, respected debt-assessors Moody's and S&P Global lowered their rating of the state's debt to one level above junk.

It's about as bad as things can get.

Or perhaps not. After all, according to Bloomberg, by June 30, Illinois will owe "an estimated $800 million in interest in fees on unpaid [government incurred] bills." Bloomberg reports that S&P will remove the state's investment grade status around July 1 if Illinois fails to address its fiscal nightmare. And so later this summer we might actually see the nation's first junk state.

So, what does Illinois need to do to get out of this self-made mess?

Well, first, state leaders need to listen to the debt assessors. As Moody's notes, the most important factor toward an improved debt-rating would be Illinois's "implementation of a realistic plan to provide long-term funding for pension obligations." Moody's is exactly right. Consider the following chart by the Illinois government's Commission on Government Forecasting and Accountability.

At $130 billion, Illinois pension liabilities are now 16 percent of the state's GDP. Sixteen percent might not sound like much, but if the federal government had the same pension liability ratio, it would amount to nearly $3 trillion. That's the scale of the mountain Illinois must climb. But to do so, Illinois must either dramatically raise taxes and lay waste to discretionary spending or completely reshape its pension system. That, or declare bankruptcy. The problem?

Illinois Democrats have ferociously resisted efforts by Republican Gov. Bruce Rauner to cut spending and challenge the state's immensely powerful alliance of unions. And the state Supreme Court has repeatedly spiked even the most modest efforts at pension reform. So the stalemate rolls on.

The taxpayers are Illinois' forgotten man. It's not just that they pay high taxes in return for poor services — it's that they are effective feudal servants to the unions. Consider this graph. It encapsulates the vast discrepancy between what Illinois government workers pay toward their pensions and what private taxpayers pay.

There's a simple description for that chart: immoral. You'll never see a pension scheme like that in the private sector because it would mean financial ruin.

Even in the best-case scenario, serious pension reform will take time. And time is something Illinois doesn't have. In the interim, Rauner and Democratic House Speaker Michael Madigan must buy time with the bond markets by showing they are serious about reform.

The Illinois Policy think tank offers seven good starters.

1. Ditch politician pensions.

2. Offer 401(k)s for new workers.

3. Offer optional 401(k)s to current employees.

4. Require all teachers to make contributions toward their own pensions.

5. Get the state out of the business of managing local school-district pensions.

6. Limit the growth of pensionable salaries.

7. Allow municipal bankruptcy.

The last idea is especially important. Local communities deserve control over their own fiscal futures. And local empowerment would also be hard for Democrats to oppose.

Regardless, today's news is just further proof of a fact we've known for a long time. Namely, that Illinois is the citadel of liberal arrogance. Whether they are pricing low-skilled workers out of the economy or paying for Hawaii holiday homes for big union bosses, Illinois leaders have lost any sense of responsibility. Like the state's coffers they control, these politicians are junk.