* Fitch downgrade adds to negative rating actions
* Cites increased budget pressure in wake of teacher pact
* Move follows Moody's, S&P actions
CHICAGO, Oct 2 Credit ratings for the Chicago
Board of Education continued their slide down the investment
grade ladder on Tuesday with Fitch Ratings dropping its rating
to A from A-plus, citing increased budget pressures in the wake
of a tentative deal that ended a teachers' strike last month.
"The labor agreement following the recent Chicago Teachers'
Union strike results in considerable increased costs to the
Chicago Public Schools," Fitch said in a statement. "The
increases come at a time of highly stressed operations, when
Fitch believes spending reductions are imperative to maintaining
The nation's third-largest school system has been hit with a
stream of negative rating actions since unveiling a $5.16
billion fiscal 2013 budget in July that drained reserves and
levied property taxes at a maximum rate to tackle a $665 million
Moody's Investors Service cut the Chicago Board of
Education's rating in July and again last week, when it was
downgraded to A2 with a negative outlook from A1. Standard &
Poor's Ratings Services dropped the rating to A-plus with a
stable outlook from AA-minus in August. Fitch initially took
action in August by revising its outlook to negative from
stable. On Tuesday it maintained that negative outlook affecting
about $6.1 billion of Chicago school debt.
A statement on Tuesday from the Chicago Public Schools
pointed to "an educational and financial crisis after years of
revenue losses and misplaced priorities."
"While we've cut more than half a billion in spending
outside the classroom, many more tough choices must be made to
address ballooning pension costs and an estimated $3 billion
combined deficit over the next three fiscal years," the
statement said, adding that support for students would not be
The latest credit downgrade came as a three-year contract
with an option for a fourth year was up for a ratification vote
by the 29,000-member teachers union on Tuesday. School officials
pegged the contract's cost at $74 million a year or $295 million
over four years, but have yet to say exactly how they will
accommodate the increase in the current fiscal year or the next
year, when the deficit is expected to hit $1 billion.
Fitch noted that the upcoming deficit was due to the
district's use of reserves in its current budget and a "dramatic
jump" in pension costs in fiscal 2014.
The expiration of a three-year, state-approved pension
funding holiday will push the school system's fiscal 2014
pension payment to $534 million from just $196 million this