Chicago's Credit Rating Downgraded by Fitch
Fitch Ratings has cut the city of Chicago's credit rating, citing mounting fiscal challenges. This financial pressure on the city could potentially influence public school budgets and the availability of special education resources. The downgrade highlights an economic context that may affect families' ability to access private coaching services.
Fitch Ratings has lowered Chicago's general obligation bond rating to 'BBB+' from 'A-'. This decision stems from ongoing operating deficits and political friction between Mayor Brandon Johnson's administration and the City Council, which Fitch noted has hindered the creation of a credible plan for structural balance. The downgrade also affected the city's Sales Tax Securitization Corporation bonds, reducing them from 'AAA' to 'AA+'. This is significant as the city has increasingly used this corporation, created by former Mayor Rahm Emanuel, to borrow at lower interest rates by separating sales tax revenue from the general fund. A major factor in the city's financial strain is its massive unfunded pension liabilities, which total around $53 billion across several city pension systems. These obligations consume a large portion of the city's budget, with over 80% of Chicago's property tax levy directed towards pensions. The city's 2026 budget, passed by the City Council over the mayor's objections, has been a point of contention. The $16.6 billion spending plan relies on measures like increased taxes on plastic bags and liquor sales, along with legalizing video gambling, rather than the mayor's preferred corporate head tax. Fitch and other agencies have expressed concern over the reliance on such "unproven" revenue sources and one-time fixes. This credit downgrade could increase borrowing costs for the city, putting further pressure on its ability to fund essential services. The financial strain extends to Chicago Public Schools (CPS), which faces its own significant budget deficit, billions in long-term debt, and underfunded teacher pensions. Civic Federation President Joe Ferguson has stated that a credit downgrade has "real financial consequences and long-term ramifications" for both the city and its residents. While the Johnson administration noted the city remains investment grade with all major rating agencies, the downgrade serves as a warning about the city's long-term fiscal stability.
