Fitch Downgrades Chicago's Credit Rating Following Budget Battle Between Johnson and City Council

Chicago’s credit rating has been downgraded by Fitch Ratings following last year’s contentious budget negotiations between Mayor Brandon Johnson and the City Council, according to the rating agency’s recent announcement.

Fitch assigned Chicago an overall BBB+ rating while downgrading the city’s sales tax securitization from AAA to AA+. The rating agency attributed the cut to Chicago’s operating deficits since 2023 and ongoing political disagreements that have hampered the city’s financial planning.

“The rating cut reflects the city’s operating deficits since 2023,” Fitch stated. The agency said the downgrade stems from disagreements between the Johnson administration and the City Council that have “impeded decision timeliness and the development of a credible and comprehensive plan to restore structural balance.”

The downgrade follows months of budget battles that nearly led to a government shutdown at the end of last year. The City Council ultimately approved a $16.6 billion spending plan in December that Mayor Johnson opposed but chose not to veto.

Johnson had proposed a corporate head tax to balance the budget, while the City Council’s approved plan relied on alternative revenue sources including an increase in the city’s plastic bag tax, changes to off-premise liquor sales taxes, legalizing video gambling terminals in Chicago, and creating new advertising opportunities.

Civic Federation President Joe Ferguson expressed concern about the rating cut’s implications. “The Civic Federation takes no pleasure in yesterday’s news that two rating agencies have downgraded the City’s credit rating,” Ferguson said in a statement. “A credit downgrade is not just symbolic; it indicates real financial consequences and long-term ramifications for not just the City but its residents.”

The Johnson administration responded by emphasizing that Chicago maintains investment-grade ratings with all four major credit rating agencies and continues to attract strong participation in its bond offerings.

“The Johnson Administration agrees with several concerns raised by the rating agencies and those concerns were expressed by the Mayor and his financial leadership team throughout the 2026 Budget process,” the administration stated. The mayor’s office specifically cited concerns about “the continued lack of structural revenue sources as well as risks related to certain revenue streams included in the Fiscal Year 2026 Budget, including the untested and non-recurring sale of uncollected receivables.”

The administration stressed that the credit rating cut does not affect the city’s “day-to-day operations, service delivery, or commitment to fiscal responsibility.” Officials also noted that rating agencies recognized Chicago’s “economic significance to the Midwest, growing tax base, and diversity of industry as positive” factors.

To demonstrate the city’s economic vitality, the Johnson administration highlighted several major development projects, including the new Chicago Fire FC stadium being built on The 78 megadevelopment in the South Loop, the Chicago Transit Authority’s Red Line extension south to 130th Street, Google’s renovation of the Thompson Center, and the LaSalle Street Reimagined projects transforming the financial district.

“The Johnson Administration will continue to lead, just as it has on the projects noted above, and work collaboratively with City Council to advance transparency, collaboration, and solutions to solidify the City’s financial foundation and the 2026 Budget,” the administration said. The mayor’s office committed to “continue engaging constructively with rating agencies and investors while prioritizing the fiscal stability of the City and the residents we serve.”

The downgrade represents a significant challenge for Chicago as it works to address structural budget issues while maintaining essential city services and pursuing major infrastructure investments.