A managing director for Moody’s Investors Service said that even as Chicago’s pension debt has climbed to $33.8 billion amid numerous credit downgrades, the city still has time to “reverse the trajectory of the pension problem.”
“Time is not about to run out for Chicago,” [Naomi] Richman said during a panel at the City Club of Chicago on Monday. “The city clearly doesn’t have forever, but there’s still time we think to make policy changes to avoid a full blown financial crisis.”
Chicago is not on the brink of default, according to Richman. The total of Chicago’s pensions and debt is more than nine times the city’s operating revenue, she said. That means that more than 35 cents of every dollar of the budget goes to pay debt and pensions.
Moody’s rates Chicago Ba1, one step below investment grade, and has a negative outlook. Right now, a downgrade is “much more likely” than an upgrade, Richman said. To get on track for an upgrade, the city needs to reverse “the trajectory of the pension problem,” Richman said. Last year, Mayor Rahm Emanuel pushed through a record $543 million property tax increase that will shore up public-safety pensions. Investors applauded the move and rallied the bonds. Still, it’s not enough, according to Moody’s.