Chicago’s rating cut one notch by Fitch due to ongoing deficits

Chicago’s rating cut one notch by Fitch due to ongoing deficits

Chicago’s Bond Rating Downgraded by Fitch Amid Fiscal Challenges
On February 25, 2026, Fitch Ratings downgraded Chicago’s general obligation (GO) bonds, including the $503 million Series 2026A (Taxable) and Series 2026B issues, to BBB—just one notch above junk status according to Fitch Ratings. The move reflects ongoing fiscal pressures stemming from recurring budget deficits, reliance on non-recurring revenue sources, and political gridlock over tax increases as detailed in a Sun-Times analysis.

The downgrade follows a pattern of deteriorating credit metrics. Fitch cited the city’s inability to resolve a second consecutive budget stalemate, which has left critical services vulnerable and eroded investor confidence according to Sun-Times reporting. Mayor Brandon Johnson’s administration has avoided property tax hikes and instead relied on one-time funding mechanisms, such as a $1 billion tax increment financing (TIF) surplus and reduced pension contributions, to bridge budget gaps as reported by the Sun-Times. Analysts warn this approach is unsustainable. "Chicago's reliance on one-time budget gimmicks is not a long-term solution," said Matt Fabian of Municipal Market Analytics, noting that such practices increase borrowing costs and strain future fiscal flexibility according to Sun-Times analysis.

The city's pension crisis further exacerbates concerns. Three of Chicago's four employee pension funds remain underfunded, with assets covering less than 25% of liabilities as the Sun-Times reported. A recent reduction in annual pension payments above state mandates has drawn criticism from rating agencies, including S&P Global, which revised Chicago's credit outlook to negative in late 2025 according to Sun-Times analysis.

Economists caution that the downgrade will raise borrowing costs at a time when infrastructure needs and climate resilience projects are critical. "Higher debt prices will ultimately burden taxpayers," said Dana Levenson, a former Chicago CFO, emphasizing that infrastructure financing will increasingly depend on property or sales tax-backed debt according to Sun-Times reporting.

Chicago's bond rating had previously improved under mayors Rahm Emanuel and Lori Lightfoot, who secured pension reforms and tax increases. However, recent policy shifts and political divisions have reversed momentum, leaving the city with more debt per capita than any major U.S. city as detailed in Sun-Times analysis. With limited fiscal tools remaining, analysts anticipate further downgrades unless structural reforms—such as sustainable revenue growth or pension adjustments—are enacted.

Fitch Ratings downgrade announcement: Fitch Ratings downgrade announcement.
Chicago Sun-Times analysis of fiscal challenges: Chicago Sun-Times analysis of fiscal challenges.