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"The city's
credit quality could weaken unless it gains both union and
legislative support for any changes to its municipal and
laborers' plans, and identifies a solid funding mechanism to
address the unfunded liabilities and prevent further
destabilization of its budget," the credit rating agency said in
a report.
The Illinois Supreme Court in March threw out a 2014 Illinois
law aimed at saving the two systems from insolvency by reducing
retirement benefits and increasing pension contributions by the
city and affected workers.
Chicago Mayor Rahm Emanuel last month announced an agreement in
principal with unions to increase funding for the laborers'
system, the smallest of the city's retirement funds. The
municipal fund, the city's largest system, is projected to run
out of money within 10 years. New accounting changes and other
factors doubled its unfunded liability to $18.6 billion at the
end of 2015 from $7.13 billion in 2014.
S&P, which rates Chicago's general obligation bonds BBB-plus
with a negative outlook, said any deal for the municipal fund
would require an identified revenue source.
The report also noted that Chicago has already raised property
taxes to boost funding for its police and fire pension funds.
Illinois lawmakers this week overrode Governor Bruce Rauner's
veto of a bill spreading out the city's payments to those two
funds. (Reporting by Karen Pierog; Editing by Matthew Lewis)
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