His former boss, Barack Obama, led the United States to its first credit downgrade in American history, and now fellow progressive leftist, Democrat Mayor Rahm Emanuel is leading the City of Chicago into a financial sinkhole as well.
Citing the growth of unfunded pension liabilities, leading bond rating service Moody’s Investors Service announced on Tuesday they were downgrading Chicago’s debt rating to junk bond status, assigning a rating of Ba1 to the city’s bonds.
After noting a recent state Supreme Court decision that declared a pension reform bill as unconstitutional, Moody’s said that the city’s options for dealing with the growing problem is narrowing.
“We believe that the city’s options for curbing growth in its own unfunded pension liabilities have narrowed considerably. Whether or not the current statutes that govern Chicago’s pension plans stand, we expect the costs of servicing Chicago’s unfunded liabilities will grow, placing significant strain on the city’s financial operations absent commensurate growth in revenue and/or reductions in other expenditures.”
Moody’s defines a Ba rating as having “speculative elements and are subject to substantial credit risk,” meaning that the city may be forced to pay higher interest costs to compensate investors for the increased risk they are now taking.
It turns out that while vote buying is lucrative from a a political power standpoint, it never pencils out on the balance sheet.
“While Chicago’s financial crisis is very real and at our doorsteps, today’s irresponsible decision by Moody’s to downgrade the city’s credit by two steps goes far beyond that reality,” Emanuel said in a statement. “Their decision was driven solely by the overturning of a state pension bill that did not include Chicago’s pension reform, yet they did not downgrade the state of Illinois.”
The city reportedly faces a shortfall of about $20 billion in its four pension plans, a number Emanuel must think is somehow responsible.