S&P downgraded Chicago’s credit rating due to budget issues and spending concerns
Chicago: So, the city just got hit with a credit downgrade from S&P. They’re saying the new budget for 2025 has some serious issues. Apparently, there’s a big gap in the budget, and they’re not seeing much room for new revenue. Plus, city leaders aren’t keen on cutting back on spending.
Scott Nees, an analyst from S&P, mentioned that Mayor Brandon Johnson’s budget leaves a big hole that could make future budgets even tougher to balance. It’s not just a bad look; it could also mean higher borrowing costs for the city, especially for big projects like the $1.25 billion housing bond coming up.
Jill Jaworski, the city’s CFO, isn’t buying the downgrade. She believes it doesn’t show how strong Chicago’s credit really is or its ability to handle debt and pension payments. S&P had already warned the city back in November about sticking to long-term pension reforms and not relying on quick fixes.
Even though Johnson kept some pension policies from the previous mayor, the overall budget still didn’t fix the city’s long-standing money issues, according to S&P. Johnson, however, thinks the downgrade doesn’t reflect the city’s economic strength or the steps they’re taking to tackle old problems.
He’s all about working with the City Council to get things balanced and improve Chicago’s financial future. He pointed out some big projects in the works, like a quantum computing campus and new developments near the United Center.
Johnson is confident they’ll face these challenges head-on, just like Chicago always has. The BBB rating means the city can meet its financial commitments, but S&P sees it as vulnerable to economic downturns. It’s just above junk status, which isn’t great.
His budget director, Annette Guzman, said fixing the budget will take time and argued against the downgrade last month. After the budget passed, other agencies like Fitch praised the city for keeping up with pension payments and noted they closed a good chunk of the budget gap with one-time revenues.
Moody’s didn’t change its rating after the budget passed, keeping it at Baa3+, which is still above junk. They said the budget doesn’t really change the city’s credit path but does continue to improve pension funding practices, which is a good sign.
