Fitch Ratings downgraded Chicago's credit rating Monday to "BBB-," one notch above junk status.
The downgrade from "BBB+" to "BBB-" with a negative outlook was prompted by Thursday's Illinois Supreme Court ruling, which found Chicago's 2014 pension overhaul to be unconstitutional. Chicago's pension measure sought to shore up its underfunded Municipal and Laborers pension funds. Without the pension changes, the city has said the two funds will become insolvent by 2026 and 2029.
"Fitch believes last week's Illinois Supreme Court ruling striking down pension reform legislation for two of the city of Chicago's four pension plans was among the worst of the possible outcomes for the city's credit quality," Fitch said in a statement. "Not only did it strike down the pension reform legislation in its entirety, but it made clear that the city bears responsibility to fund the promised pension benefits, even if the pension funds become insolvent."
Monday's credit downgrade impacted $9.8 billion of the city's general obligation bonds and $486 million of sales tax revenue bonds.