CHICAGO, Oct 31 (Reuters) - S&P Global Ratings revised the outlook on the Chicago Board of Education’s junk credit rating to stable from negative on Tuesday, citing a boost in state and local funding for the cash-strapped school district.
A recently adopted new Illinois education funding formula resulted in a $450 million funding boost for the Chicago Public Schools (CPS) through increased aid and pension contributions from the state and a local property tax increase.
“The outlook revision is based on our view of the district’s higher state aid revenue as a result of the state’s new funding formula, and lower pension costs, with the state now picking up more of the employer pension contribution, and the district’s ability to extend a higher property tax levy to support the pension contribution,” S&P analyst Jennifer Boyd said in a statement.
The rating agency affirmed the district’s B rating.
Escalating pension payments have led to drained reserves, junk credit ratings and debt dependency for CPS, the nation’s third-largest public school system.
Last week, Fitch Ratings upgraded CPS from B-plus to BB-minus, which is three notches below investment grade. Fitch said higher state funding “improved prospects for financial balance and eventual restoration of a positive reserve position.” CPS CEO Forrest Claypool said the rating actions acknowledge the district “is on much stronger financial footing that we were just a few months ago and that we’re on the right track.”
The actions come as CPS prepares to refinance about $630 million of outstanding debt and issue about $290 million of new bonds in mid-November. (Reporting By Karen Pierog; Editing by David Gregorio)