Because of a Moody’s downgrade, Chicago finances may be about to get dramatically worse.
Our ruling class act like they know what they are doing. They may even be deluded enough to believe their own deceptions. But the truth is that the “stability” they claim to bring society can collapse at any moment. Yes they may manage to keep things going for awhile, but the end will happen quickly when it comes.
All of this may soon get demonstrated in the case of Chicago.
According to Reuters, “Exclusive: Chicago nears fiscal free fall with latest downgrade.”
Chicago drew closer to a fiscal free fall on Friday with a rating downgrade from Moody’s Investors Service that could trigger the immediate termination of four interest-rate swap agreements, costing the city about $58 million and raising the prospect of more broken swaps contracts.
The downgrade to Baa2, just two steps above junk, and a warning the rating could fall further still, means the third-biggest U.S. city could face even higher costs in the future if banks choose to terminate other interest-rate hedges against fluctuations in interest rates. All told, Chicago holds swaps contracts covering $2.67 billion in debt, according to a disclosure late last year.
“This is an unfortunate wake-up call for anyone still asleep over the fiscal cliff facing the city of Chicago,” said Laurence Msall, president of the Chicago-based government finance watchdog, The Civic Federation.
Chicago’s finances are already sagging under an unfunded pension liability Moody’s has pegged at $32 billion and that is equal to eight times the city’s operating revenue. The city has a $300 million structural deficit in its $3.53 billion operating budget and is required by an Illinois law to boost the 2016 contribution to its police and fire pension funds by $550 million.
Cost-saving reforms for the city’s other two pension funds, which face insolvency in a matter of years, are being challenged in court by labor unions and retirees.
State funding due Chicago would drop by $210 million between July 1 and the end of 2016 under a plan proposed by Illinois Governor Bruce Rauner.
Given all the financial pressures, both Moody’s and Standard & Poor’s, which affirmed the city’s A-plus rating, warned on Friday that Chicago’s credit ratings have room to sink.
What is amazing about this story is that it comes from an establishment source. This is not a post on some kind of alternative economy blog. The mainstream news media is sounding the alarm!