CHICAGO — Moody’s Investors Service Thursday hit Cook County, Ill., with a downgrade, affecting $3.5 billion of outstanding general obligation bonds issued by the nation’s second-largest county.

The drop  to Aa3 from Aa2 comes days after the county revealed a pair of accounting errors in its fiscal 2009 audit that inflated general fund revenues by $90 million and will likely aggravate an already-challenged fiscal position, Moody’s said.

“We have been keeping our eye on the county for quite some time now,” analyst Genevieve Nolan said in a telephone interview yesterday. “We decided it was time to signal the market regarding the situation in the county.”

Cook is expected to enter the bond market next month with a refunding issue aimed at generating debt service savings crucial to balancing the fiscal 2012 budget.

As an economic engine of the Midwest and home to Chicago, Cook County enjoys one of the largest and most diverse revenue bases in the U.S., Moody’s said. The credit is also stabilized by a home-rule status that gives it sole authority to increase fees and taxes.

The county joins Chicago and Illinois, both of which have suffered downgrades over the past year.

County Board President Toni Preckwinkle won office last year promising to restore fiscal ­stability to a government long plagued by accusations of patronage, corruption and financial mismanagement.

Preckwinkle has been in office since December, but Moody’s has not yet met with the new administration, Nolan said.

County officials did not return calls seeking comment on the downgrade.

Preckwinkle disclosed the accounting mistakes last week, sending Moody’s the revised revenue figures last Friday. The mistakes occurred in part due to double-counting various revenues.

Revised 2009 general fund balance now totals $97 million, down from the originally reported $187 million.

“The $90 million will mean a weaker position for the general fund, and that was certainly an issue,” Nolan said. “But it wasn’t the only issue.”

One looming challenge is a scheduled rollback of a two-year-old 1% sales tax hike that was expected to generate $400 million annually.

The board has voted to roll back the increase in response to intense political pressure.

Others pressures include significantly diminished reserve levels, growing unfunded pension liabilities, and an expected deficit in the county’s massive health care system, Moody’s said.

For its pension system, the county reported a fiscal 2010 funded ratio of 61%, down from 86% in fiscal 2007. Its unfunded actuarially accrued liability has increased to $5.1 billion from $3 billion in 2008, Moody’s said.

“The county’s financial challenges have continued to grow, but going forward it is well-positioned to maintain its current rating as it has a variety of revenue and cost-cutting options still available,” Nolan wrote in the downgrade report.

Cook is expected to enter the market next month with a refunding tentatively sized at $270 million.

The transaction could generate $60 million in net present-value savings, chief financial officer Tariq Malhance said in March.

The structure would push off $87 million of debt service payments due this year, reducing them to $126 million from $213 million.

Officials also plan to restructure $92 million of payments scheduled for 2012 and 2013, Malhance said.

Refunded debt will likely include a mix of tax-exempt bonds and taxable pension bonds sold in 2010. The restructuring will increase debt service payments from 2014 through 2031, Malhance said.

Preckwinkle tapped Malhance, a former Chicago comptroller, as her new chief financial officer in January.

The county board in February passed a $3.1 billion budget for fiscal 2012 that brought down a record $487 million deficit with a mix of cuts, one-time revenue measures, and the savings expected to be generated by the debt restructuring.

Fitch Ratings and Standard & Poor’s both rate the county AA with stable outlooks.

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