CHICAGO—City officials respond to Moody's Investor Service's downgrade of its upcoming $338–million bond issuance on Tuesday by saying the move underscores the need for pension changes during the General Assembly's spring session.

Moody's lowered the rating on the bond issuance from A3 to Baa1. While the new rating is still investment grade, it puts the city on a lower rating tier and could cost the city more to borrow. Moody's also gave the city a “negative outlook” due to its city worker pension shortfall and overall city debt, according to the Chicago Tribune.

The rating “reflects the city's massive and growing unfunded pension liabilities, which threaten the city's fiscal solvency absent major revenue and other budgetary adjustments adopted in the near term and sustained for years to come,” Moody's states. “The size of Chicago's unfunded pension liabilities makes it an extreme outlier.”

“While we disagree with the action taken today by Moody's, we do agree that the city's pension challenges will have a direct impact on its long-term financial stability without reform,” Lois Scott, chief financial officer for the City of Chicago, states in response to the credit rating downgrade. See story in the Chicago Tribune.