S&P revises Chicago's outlook to negative over pensions
Wednesday, September 18, 2013
(Reuters) — Standard & Poor's Ratings Services revised the outlook on Chicago's A-plus general obligation rating to negative from stable, citing a looming jump in the city's public pension payments.
"The outlook change reflects our view of the risks involved in how the city will address its upcoming, large pension payments," said S&P; credit analyst Helen Samuelson in a statement released late on Friday.
Under an Illinois law mandating actuarially required pension payments for police and fire retirement funds, Chicago's payment is projected to top $1 billion in fiscal 2015 from $483.4 million in fiscal 2014, which begins Jan. 1. Subsequent payments are expected to continue to climb, hitting $1.25 billion in fiscal 2020, according to a fiscal analysis released by the city in July.
Without a dramatic increase in revenue, Chicago would need the Illinois Legislature to pass reforms to ease pension payments. However, state lawmakers have yet to come up with a solution to Illinois' $100 billion unfunded pension liability.
S&P; noted the unfunded liability for Chicago's four retirement funds had grown to $19.4 billion in 2012 from $11.9 billion in 2009, with a funded level of just 35 percent. An 80 percent funded level is considered healthy.