Moody's Investors Service said it has downgraded the rating on Chicago Board of Education's general obligation debt to A1 from Aa3.

Concurrently, Moody's has revised the outlook to negative from stable.

The A1 rating and negative outlook apply to $5.9 billion of the district's outstanding general obligation debt. Of this amount, $5.6 billion was issued by the Chicago Board of Education and $300 million was issued by the Chicago Public Building Commission. The Chicago Board of Education serves as the primary debt issuing arm for Chicago Public Schools.

The downgrade to the A1 rating reflects a substantial and diverse tax base, coterminous with the City of Chicago (GO rated Aa3/negative outlook); a financial profile marked by mounting budgetary pressures and the expectation of a substantial reduction in reserves and liquidity in fiscal 2013; increased pension contribution obligations; and an above-average debt burden.

The revision of the outlook to negative from stable primarily reflects fiscal challenges and pressures resulting from delayed intergovernmental revenues from the state of Illinois (GO rated A2/stable outlook); uncertainty surrounding the outcome of current labor negotiations with the Chicago Teachers Union (CTU); increased pension contributions following three years of legislative pension relief; and an estimated $1 billion budget gap for fiscal 2014.

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