Moody's drops CPS, Chicago Park District credit rating

CHICAGO (WLS) -- Just one day after Moody's Investors Service dropped Chicago's credit rating to junk bond status, the agency has now downgraded both Chicago Public Schools and the Chicago Park District to the same level.

The city's unfunded pension liabilities are not helping Chicago's overall financial situation. On Wednesday night, the mayor criticized the credit rating company on WTTW.

"To take an action on the city about a state pension, not to take any action on the state because their situation is not any stronger, I think is irresponsible," Emanuel said.

Over $20 billion in unfunded pension debt has virtually destroyed the city's credit rating, as far as Moody's is concerned, and city officials are scrambling to staunch the fiscal hemorrhage.

City lawyers were at the Daley Center Wednesday defending the city's most recent pension reform deal with its non-public safety workers. That agreement is now threatened by last week's Illinois Supreme Court ruling.

"We think that the city's statute is fundamentally different than the statute that was ruled upon by the Supreme Court," said Stephen Patton, Chicago Corporation counsel.

The high court outlawed the state pension reform bill passed two years ago, ruling that benefits "cannot be diminished or impaired." The decision was cited in Moody's report on Chicago finances Tuesday, writing that "the city's options for curbing growth in its own unfunded pension liabilities have narrowed considerably."

"At some point the city has to fund the pensions the way that the law reads," said Clint Krislov, plaintiff's attorney.

Lawyers for retired city employees who have sued to stop the city's pension reform believe their case, aimed at maintaining their current benefit levels, is buttressed by the Illinois Supreme Court ruling.

"We did what we were supposed to do. We dedicated our lives to the city. We paid our property taxes, we lived in the city and now we're getting crucified. Why?" said Charles Lomanto, a retired city worker.

When a city's credit falls so low and its bond rating is considered junk status, it means that financing is only available from lenders that might be considered the loan sharks of municipal finance.

Patton says he wants the city pension reform case settled as soon as possible.

"On both sides, the sooner the better so we know where we stand," he said.

Patton indicated in court Wednesday that the city will argue the constitutionality of its pension reform effort all the way to the Illinois Supreme Court, if necessary - despite the court's ruling last week in the state's case.

Truth in Accounting Founder/CEO Sheila Weinberg, who has studied Chicago's finances, says the city is not alone.

"All the villages have horrible pension problem," Weinberg said.

The worst cases, she says, are: McCook, Bedford Park, Rosemont, Hodgkins, and Melrose Park.