S&P Global Ratings announced Tuesday the city's general obligation bond rating went from "BBB+" to just "BBB."
That means the credit agency believes the city is more likely to default.
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This comes after months of turmoil in City Hall over Chicago's budget, before the Council finally passed a budget near the end of the year.
The city is pushing back on the downgrade, saying, "Despite the public budget negotiations over the last couple of months, the City's credit fundamentals have not changed, ...and the rating does not accurately reflect the strength of the City's credit or ability to meet its debt and pension obligations."