Chicago's pension woes took another bite out of the city's credit rating today as Fitch Ratings downgraded its view of city debt two levels — just one level above junk.

In an email today, the New York financial firm prominently noted last week's Illinois Supreme Court decision overturning as unconstitutional legislation that would have refinanced city pension funds—covering laborers and white-collar workers—that are more than $8 billion short of the money they will need to pay promised benefits.

The decision "was among the worst of the possible outcomes" for the city, Fitch said in its assessment, since it not only overturned the legislation, but "made clear that the city bears responsibility to fund the promised benefits, even if the pension funds become insolvent."

Added Fitch: "Since last week's ruling appears to eliminate the option of reducing the liability, the city will need to rely on its ability to increase revenues and control spending."

The firm also noted that legislation to allow the city to stretch out payments to its police and fire pension funds, saving it $220 million a year now, has been passed by state lawmakers but not sent to Gov. Bruce Rauner, who has threatened to veto it unless other steps are taken as part of his turnaround agenda.

Fitch lowered its rating on more than $10 billion in city debt from BBB-plus to BBB-negative, with a negative outlook.

“The decision by the Illinois Supreme Court is disappointing, but the city's ability to pay our debt and meet our current commitment to the pension funds has not changed,” Carole Brown, Chicago's chief financial officer, said in an e-mailed statement today.

Moody's Investor's Service already has city debt at junk levels. A third firm, S&P, has Chicago still at investment grade, but only by one notch.

The downgrade affected $9.8 billion of general-obligation bonds and $486 million of debt backed by sales taxes. The company said the outlook is negative, indicating that the rating could be lowered further.

Update, March 29 — Moody’s now is commenting, and though it’s not knocking Chicago debt further into junk land, it says the court decision overturning the Chicago reforms is “a credit negative” for the city.

"Without the benefit savings that (the overturned reforms) established, Chicago’s contributions will have to rise even further if the city is to stick to the schedule of a 90% funded ratio by 2055,” Moody’s said in a report issued today. "Negotiating increased employee contributions remains an option, but would likely have only a modest effect on lessening Chicago’s funding burden.”

The report also dinged poor investment returns by the two pension funds in question, saying, "asset returns for 2015 were 1.8% for the municipal plan and -1.5% for the laborer plan. Both plans assume a long-term average investment rate of return of 7.5%.”

Ouch!

Bloomberg contributed to this article.