Moody's downgrades Chicago's rating over pensions

[Valin]

AP:

JASON KEYSER

Feb. 28, 2015

 

CHICAGO (AP) — Moody's Investors Service has downgraded Chicago's credit rating to two levels above junk status, citing the city's $20 billion mountain of unfunded pension liabilities.

 

The agency said Friday that it lowered the rating on $8.3 billion in general obligation debt from Baa1 to Baa2. Moody's also maintained its negative outlook for Chicago, indicating another downgrade could occur even if recent efforts to address the city's pension problems survive legal challenges.

 

"Regardless of outcome of the legal challenges to pension reforms, we expect Chicago's unfunded pension liabilities — and the costs of servicing those liabilities — to continue to grow, placing significant strain on the city's financial operations," Moody's said.

 

The announcement thrust the pension issue back to the center of Chicago's mayoral campaign. Mayor Rahm Emanuel faces Cook County Commissioner Jesus Garcia in an April 7 runoff after failing to get enough votes for an outright win on Tuesday, despite millions of dollars in campaign funds and support from business leaders.

 

(Snip)

[Geee]

Rahm Emanuel's Chicago Nears Fiscal Free Fall

 

Cities: The problem with socialism, Margaret Thatcher once noted, is you eventually run out of other people's money. In progressive Chicago, that's hit home as Moody's has cut its credit rating to two grades above "junk."

 

Chicago's finances are staggering under the weight of an unfunded pension liability that Moody's Investors Service has estimated at $32 billion, eight times the city's operating revenue.

 

Chicago has a $300 million structural deficit. And Illinois law requires the city to up its 2016 contributions to its police and fire pension funds by $550 million.

 

"This is an unfortunate wake-up call for anyone still asleep over the fiscal cliff facing the city of Chicago," said Laurence Msall, president of the Chicago-based government finance watchdog, the Civic Federation.

 

The steady financial decline of the nation's third-largest city prompted us recently to say that Chicago was well on its way to becoming the next Detroit.

 

In other words, it's another bankrupt monument to the perils of Democratic governance: a one-party town in one of the bluest states, whose mayor, former White House Chief of Staff Rahm Emanuel, learned financial discipline at the feet of President Barack Obama.

 

http://news.investors.com/ibd-editorials/030215-741568-emanuels-chicago-nears-fiscal-free-fall.htm

[Valin]

@Geee

 

This is not just Chicago...Detriot...Etc. The Blue Social Model that began at the turn of the century is now breaking down.