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Moodys also concluded that the police and fire pension debt could grow by even more than $3.3 billion if the pension funds dont achieve their assumed annual returns on investment, which range from 7.5 percent to 8 percent levels it said none of the citys four pension funds even came close to achieving last year.

Emanuels plan reduces contributions to the police and fire pension plans by nearly $1 billion between now and 2019, the year of the next city election, as Chicago faces additional financial pressures. Those include the need to come up with hundreds of millions in additional revenue likely from more tax, fine and fee increases to restore financial soundness to pension plans for city laborers, municipal workers and Chicago Public Schools teachers.

Moodys isnt the only agency that reacted unenthusiastically to the new police and fire pension law. Standard amp; Poors, which still rates the citys credit as investment grade, warned this week of further downgrades if the city doesnt engineer fixes for the laborers and municipal workers plans.

Additional downgrades would be a hit on taxpayers because interest rates the city would have to pay to borrow money would increase. The city plans to issue $600 million in bonds in the coming months to pay for major construction projects, equipment purchases and legal settlements.

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