K-12 Tax & $pending Climate: Chicago Dug Itself Out of a Financial Hole. Now It’s Sliding Back In
In 2022, the city of Chicago hit a milestone it had been targeting for seven years: It lifted a key credit rating out of junk status.
Pandemic-stimulus funds from the federal government and more-disciplined pension-fund contributions helped the city rise out of non-investment-grade status with Moody’s, to a level one notch above junk. Fitch, which had been holding Chicago in low investment-grade territory, also began issuing upgrades. Other agencies lifted the outlook on their investment-grade ratings from stable to positive.
Fast forward to today and Chicago is slipping back in the wrong direction.
This year, the city had to bridge a $1.2 billion deficit to balance the budget, as Illinois law requires. Next year, the city will have to close a roughly $700 million deficit, a mayoral task force estimates.
Structural budget deficits, political disorder and ballooning payments on pensions and debt service have prompted three ratings firms to downgrade Chicago’s credit since January 2025—to levels two or three notches above junk. Moody’s last summer lowered Chicago’s outlook to stable from positive while maintaining its rating one notch above junk.
