The pension battle in Chicago and Illinois will be fueled by Moody’s latest announcement:
Moody’s Investors Service downgraded Chicago’s credit rating, citing the city’s unfunded pension liabilities. The agency announced Tuesday it was lowering the rating on $8.3 billion in debt to Baa1, from A3, putting it only three notches above junk status. Moody’s gave Chicago a negative outlook, indicating another downgrade could occur if there is no pension fix.
Moody’s says the rating “reflects the city’s massive and growing unfunded pension liabilities.” It says those liabilities “threaten the city’s fiscal solvency” unless major revenue and other budgetary adjustments are adopted soon and are sustained for years to come. The lower rating means the city may have to pay higher interest rates. Moody’s said a commitment to raising tax revenue is a factor that could lift the credit rating.
Last year, Fitch Ratings downgraded Illinois just days after the state legislature adjourned (May 31) without passing pension reform. After the Governor threatened to withhold legislator salaries until pension reform was passed, the legislature rallied to pass legislation in November that was signed into law December 5, 2013. Litigation over terms of the reform is ongoing.
For some local coverage of the “reform” effort in Illinois, go here.