Standard & Poor's Ratings Services said it revised its outlook to negative from stable and affirmed the A-plus rating on Chicago's general obligation debt under our recently released local GO criteria.

"The outlook change reflects our view of the risks involved in how the city will address its upcoming, large pension payments," said Standard & Poor's credit analyst Helen Samuelson.

The rating reflects the assessment of the following factors for the city, specifically its: broad and diverse economy, given its status as a major regional economic center; adequate budgetary flexibility, which indicates that, although the city has home rule status, which provides increased taxing and borrowing capacity, its flexibility is limited by the city's reluctance to adjust taxes; very weak budgetary performance, reflecting recent deficits and a reliance on reserves to balance operations and continued budget challenges; very strong liquidity providing very strong cash levels to cover both debt service and expenditures; strong management conditions with good financial practices and policies in place; very weak debt and contingent liabilities position, driven mostly by the city's high net direct debt; and weak Institutional Framework score.

The overall unfunded liability of the four plans is $19.4 billion as of 2012, up from $11.9 billion in 2009, and the plans altogether are 35% funded.

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