Under a near crippling amount of debt and unfunded liabilities, Chicago lawmakers recently moved towards pension reform – but were denied by the courts who deemed the reforms to be in violation of the Illinois constitution.
On May 12nd, 2015, Moody’s Investors Service downgraded Chicago’s credit rating once again, which means that in less than two years Chicago’s credit rating has dropped seven notches under the rating agency. Moody’s also announced major downgrades for the Chicago Board of Education and the Chicago Park District debt – reducing the bonds to junk levels.
On July, 28th, 2015, Fitch Ratings followed by downgrading the Chicago Board of Education’s credit rating and also noted a negative outlook for the CPS which means that further downgrades are likely in the future.
Chicago joins Detroit in the illusive group of major cities with junk bond ratings from major institutions, which carries with it incredibly serious financial repercussions and increases the costs of borrowing.
The difference between the two cities is that Chicago’s debt and unfunded liabilities are more than three times higher than Detroit’s were when the city declared bankruptcy in 2013.
Chicago is unable to restructure its debt because the state does not allow municipalities to go bankrupt.
To put things in perspective: Every Chicago household is currently on the hook for at least $63,800 in local-government debt.
If things couldn’t possibly get any worse, the threat of another teachers strike is looming over the Chicago Public Schools with the expiration of the teachers’ union contract. Negotiations have not gone well.
Welcome to Chicago. There Will Be No Economic Recovery.
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