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updated: 7/24/2013 5:28 PM

Moody's downgrades Chicago schools' debt rating

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Associated Press

Moody's Investors Service has downgraded its rating of the Chicago Board of Education's general obligation debt.

Moody's says the downgrade to A3 from A2 reflects significant debt and pension obligations of overlapping governmental entities on the district's tax base. The negative outlook applies to $6.3 billion of the school district's general obligation debt.

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The school district on Wednesday announced a $5.6 billion budget for the upcoming school year. It includes an increase of $405 million in pension payments the district must make because pension reform failed in the Illinois Legislature. Moody noted the district tapped its reserves to deal with a $1 billion budget deficit.

Last week, Moody's downgraded the city's debt rating, pointing to Chicago's $19 billion unfunded pension liability. Illinois has a $97 billion pension shortfall.

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