Illinois' $97 billion pension problem isn't doing any favors for Chicago.
Moody's Investors Service late Wednesday downgraded the city's debt rating from Aa3 to A3 because of the city's "very large and growing" pension liability.
Though the ratings for general obligation debt and sales tax debt are still investment grade, Moody's says the outlook is negative because of "formidable legal and political barriers to pension reform" in Illinois.
The downgrade affects $8.2 billion in debt and means it will cost more for the city to borrow money.
Illinois' credit rating, the lowest in the nation, was downgraded twice in one week last month after lawmakers failed to enact a solution to fix the state's nearly $100 billion pension shortfall.
Moody's downgraded the state's credit rating from A2 to A3 after Fitch Ratings dropped Illinois' rating from A to A-, citing pension problems. Standard & Poor's rating services lowered the rating in January.
Gov. Pat Quinn called a special session after the series of downgrades and last week suspended lawmakers pay after they missed his deadline to deliver pension reform.
Moody's says Chicago has a $19 billion unfunded pension liability, and will face "tremendous strain" in future operating budgets as city officials try to meet funding requirements and public safety demands.
