(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.
“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.
