CHICAGO, Sept 5 (Reuters) - The Chicago Public Schools (CPS) avoided a downgrade of its already low B3 credit rating with Moody’s Investors Service, which affirmed the rating on Tuesday, citing additional revenue for the cash-strapped district.
Moody’s had placed the junk bond rating for $5.3 billion of CPS general obligation bonds on review in July for a possible downgrade into the highly speculative Caa rating level.
Escalating pension payments have led to drained reserves and debt dependency for CPS, the nation’s third-largest public school system.
Illinois Governor Bruce Rauner last week signed into law a new education funding formula that includes a $450 million funding boost for CPS through increased aid payments and pension contributions from the state and a local property tax increase.
“The B3 rating and stable outlook on the district’s (general obligation) debt reflects the district’s financial distress that will likely persist but not materially worsen in the coming year given new state and local revenues,” Moody’s said in a statement.
It added that while the additional revenue will help CPS balance its fiscal 2018 budget, the district remains dependent on cash-flow borrowing for operations and will likely face future budget shortfalls. (Reporting by Karen Pierog; Editing by Leslie Adler)