The finances of the Chicago Public Schools got a moderately positive review Monday from Moody’s Investors Service, which upgraded its rating on the system’s $3 billion debt by one notch.
Moody’s raised its rating on CPS debt to B1 from B2, still four notches below investment grade but with a positive outlook. Spokesman David Jacobson said that means the rating could be lifted again in the next year or two.
The improved outlook “reflects a significant infusion of new state and local revenue that will stave off material cash flow pressures for at least the next two to three years,” Moody’s said. It said the system appears able to handle higher costs associated with pension contributions, debt payments and new union contracts, including its deal with the Chicago Teachers Union that provided for a 16% raise over five years.
The rating “also incorporates the expectation that the district will not materially increase its reliance on short-term borrowing or other sources of non-recurring revenue,” Moody’s said.
Earlier this month, CPS also drew praise from the Kroll Bond Rating Agency, which noted that the new teachers contract gave the system “labor cost certainty.” Kroll held its rating on CPS bonds steady at BBB with a positive outlook.
Less impressed was S&P Global, which panned the new contract as unaffordable. S&P Global kept its credit rating assigned to CPS at BB-, a speculative rating.
The better the credit ratings, the lower the interest rate CPS must pay, potentially saving it tens of thousands of dollars over time when it issues new debt.
