OREANDA-NEWS. July 28, 2015.  Today's Cook County Circuit Court ruling striking down pension reform plans for two of the city of Chicago's four pension plans will not have an immediate effect on the city's BBB+ ratings, according to Fitch Ratings.

'This is the first step towards determining the legality of the city's pension reform efforts,' said Arlene Bohner, Senior Director at Fitch Ratings. 'We expected that whoever lost this first round would appeal the ruling, with the ultimate decision likely to be made by the state Supreme Court.'

Fitch anticipates such a ruling could come as soon as the end of the year, if a direct appeal to the Supreme Court is permitted. If the pension reform changes to the cost of living adjustments and employee contributions are ultimately found to be unconstitutional, the city would likely revert to the lower, statutorily based payments, the related liability would be expected to continue to rise and the rating would likely be downgraded.

Pension funding represents the greatest risk to the city's 'BBB+' bond rating (which carries a Negative Outlook). Implementation of pension solutions that move all the city's pension plans on a clear path toward adequate funding while preserving sustainable budgetary balance are a prerequisite to removing Fitch's Negative Outlook on the rating. Absent that, the rating is likely to be downgraded.