Chicago Schools Plunge Further Into the Abyss

Elizabeth Campbell

Chicago, the nation’s biggest junk-rated city, has raised taxes and moved to shore up its debt-ridden pension system, but for its schools, the triage still has a ways to go. […]

The Chicago Board of Education is facing a potential strike by its teachers, which could further strain its coffers. The third-largest U.S. school district’s budget counts on state aid and union concessions that may not come. And this week, Moody’s Investors Service cut its rating deeper into junk, citing its “precarious liquidity” and reliance on borrowed money, as preliminary data showed an enrollment drop of almost 14,000 students — a loss that may cut into its funding.

The chronic financial strains may lead investors to demand higher interest rates from the debt-dependent district. With $6.8 billion of general-obligation debt, it’s already paying yields of as much as 9 percent, according to Moody’s. More than 10 percent of this year’s $5.4 billion budget is eaten up by principal and interest costs.