Chicago mayor, CFO react to S&P Global dropping city’s debt rating
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[January 17, 2025]
By Jim Talamonti | The Center Square
(The Center Square) – Chicago Mayor Brandon Johnson and his chief
financial officer are talking about revenue as the city suffers a
reduced credit rating.
S&P Global Ratings announced on Tuesday that it had downgraded Chicago’s
general obligation debt rating from BBB+ to BBB. A lower credit rating
means higher taxpayer costs when the city goes to borrow money.
Chicago CFO Jill Jaworski said S&P Global targeted specific things in
the city’s budget process last year.
“They also noted that the acrimonious process was a consideration, and
they viewed the fact that the property tax [increase] was not passed as
giving the city less options going forward,” Jaworski said.
In a statement announcing Chicago’s downgraded debt rating, S&P Global
Ratings cited the city budget’s failure to address “persistent
structural imbalance.”
"The downgrade reflects our view that the 2025 budget leaves intact a
sizable structural budgetary imbalance that we expect will make
balancing the budget in 2026 and outyears more challenging," said S&P
Global Ratings credit analyst Scott Nees.
The S&P statement said Chicago’s practical options for raising new
revenue “appear less certain, as does the willingness of city leadership
to cut spending, creating a level of uncertainty around its financial
trajectory that is more appropriately reflected in the lower rating.”
Last month, the Chicago City Council voted 27-23 in favor of a $17.1
billion budget, which includes a $40 million loan. Aldermen rejected
Johnson’s proposed property tax hikes, and several council members urged
spending cuts.
The mayor said he would consider a congestion tax.
“Look, I think we’re open to all forms of progressive revenue and ways
that we can be more environmentally sound,” Johnson said.
The mayor criticized outgoing Chicago Public Schools CEO Pedro Martinez,
saying Martinez’ CPS budget did not provide enough money for Chicago
Teachers Union members.
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Chicago CFO Jill Jaworski
Chicago Mayor's Office | Facebook
“It is highly unusual and not best practice for a budget to be put
forth which doesn’t consider the cost of labor and pensions. There
is no other executive that I am aware of in the state of Illinois,
whether it’s at the state level, the county level or even my
position that passed and approved a budget – and this is what came
directly from the CEO – that did not consider the salary and the
compensation for workers and pensions,” Johnson said.
The mayor said the move was unprecedented.
“To put forth a budget without that consideration is not only
inconsiderate, but it is irresponsible,” Johnson added.
CTU has demanded 9% pay raises for teachers while Martinez refused
to budge from 4% during negotiations. CPS’ total budget for the
current school year is $9.9 billion. Martinez said CPS anticipates a
deficit of more than $500 million next year.
Johnson’s recently-appointed school board members fired Martinez,
effective at the end of the school year, before elected board
members were seated.
Jaworski said city officials disagreed with S&P Global’s credit
downgrade, although she admitted last month that credit agencies
would be monitoring the city’s supplemental pension payments.
Several aldermen, including Nicole Lee of the 11th Ward, warned that
the debt rating would drop if the city council approved the current
spending plan.
“All expert accounts indicate that this budget’s over-reliance on
one-time remedies, rather than structural solutions, are gonna lead
us to multiple credit-rating agency downgrades,” Lee said.
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