From EAG News:
CHICAGO – Moody’s Investors Service now rates Chicago Public Schools’ credit below “junk” status.
After dropping CPS’ credit to “junk” in May, Moody’s cut CPS’ rating again Monday from Ba3 to B1, and warned it could cut its rating further if the school district doesn’t correct its financial crash course, the Associated Press reports.
“The downgrade to B1 reflects the precarious liquidity position of the district. CPS has increasingly relied on market access and cash flow borrowing to maintain ongoing operations,” according to a Moody’s release.
“The downgrade also reflects the district’s structurally imbalanced fiscal 2016 budget, which assumes $480 million in additional state fu
nding that has yet to be appropriated by the State of Illinois (Baa1 negative). The lack of a state budget nearly six months into the fiscal year has delayed certain other revenues.”
The credit rating service also noted CPS’ “escalating pension contributions and recent use of reserves to fund recurring contributions.”
The rating drop, which increases borrowing costs for the district, comes as CPS remains at odds over a new labor contract with the Chicago Teachers Union that could further increase operating expenses. The CTU is now threatening to strike if CPS does not meet its demands.
The union contract negotiations also hinge on the district’s budget predicament, which CPS officials believe can only be solved with a massive cash infusion from state lawmakers. CPS officials have repeatedly called on the CTU to help lobby lawmakers for a bailout, but the union appears unmoved.