UPDATED 09/28/12 11:23 a.m.
CHICAGO (CBS) -- One of the nation's bond rating agencies is out with another warning about the Chicago Public Schools system's financial future.
As WBBM Newsradio's Bob Conway reports, Moody's Investors Service has downgraded the school system's debt status, warning that the Chicago School Board, because of various provisions of the new teachers' contract, will be hard-pressed to make the budget adjustments needed to close an estimated $1 billion gap for fiscal 2014.
LISTEN: WBBM Newsradio's Bob Conway reports
Moody's says the downgrade from A1 to A2 reflects a weakened financial picture brought about not only by the contract, but also by a depletion of financial reserves, a future increase in pension payments and the slow pace of state aid. And Moody's warns further rating downgrades would be likely unless the problems are addressed.
This is the second time Moody's has downgraded the CPS' bond rating in the past three months.
In July, Moody's downgraded CPS' debt from A1 to A3, after school district officials announced the plan to drain its entire reserve fund to balance next year's budget.
Since then, the CPS system has been through a nine-day teachers' strike, which ended with the contract with which Moody's now takes issue.
In response to the downgrade, CPS chalked it all up to a consequence of the fiscal issues that have plagued the school system.
In correcting those issues, CPS emphasizes that students will not be shortchanged.
"Over the past year, we have cut more than a half-billion dollars – all outside of the classroom. We know this is not enough to undo years of revenue losses and misplaced priorities that have left the district with the fiscal crisis it faces today and we continue to make tough decisions to put CPS on the best financial footing possible, without sacrificing investments in our children's education," CPS said in a statement.
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