Mayor Rahm Emanuel’s 2018 budget “tackles a small, but not insignificant portion of the city’s rising debt and pension costs,” but more needs to be done to put Chicago “on a path to fiscal sustainability,” a Wall Street rating agency said Thursday.

A day after Emanuel delivered a budget address that proclaimed city finances “back on track,” Standard & Poor’s claimed otherwise.

The rating agency noted that the $3 billion borrowing plan that isolates sales tax revenue in a special fund is expected to generate $94 million in savings next year. It helped eliminate a $288 million gap that includes the second year of a police hiring surge.

But without that savings, debt service costs would have increased by $100 million, or 18 percent over fiscal year 2017. And Emanuel would not have been able to end scoop-and-toss borrowing one year earlier than planned.

Even with the savings, total budgeted debt service expenses are $821.3 million. That’s 12.4 percent of all budgeted expenses.

Standard & Poor’s assigns a BBB-plus/Stable rating to Chicago’s general obligation bonds. The rating agency also noted that the so-called “securitization” structure does not come without risk.

“Sales taxes account for a significant share of corporate fund revenues [17 percent in the proposed 2018 budget] and, to the extent that a growing share of these sales taxes go to fund debt service, if not offset by other measures, Chicago could face further operating budget pressures,” the rating agency said.

Overall, Standard & Poor’s views Emanuel’s 2018 budget as a “positive step toward addressing the city’s long-term fiscal sustainability.” But, the rating agency also views the spending plan as “largely status quo.” That’s because the use of “non-recurring revenues to close the city’s budget gap “would remain similar” to what it was a year ago.

Even by the city’s own projections, Chicago faces shortfalls of $212.7 million and $330.3 million over the next two years that could “grow significantly… should economic growth projections fall short.”

And even though dedicated funding sources have been identified for all four city employee pension funds, a dark cloud still hovers over city finances.

“Following five-year ramp-up periods per revised statue, Chicago has yet to identify funding sources to address significant statutory pension contribution increases as it is required to fund the full [contribution] for police and fire pension funds in fiscal 2020 and Municipal and Laborers plans in 2022,” the rating agency said.

By the city’s own estimate, police and fire pension costs will rise by $297.3 million or 36 percent in 2020. The Municipal and Laborers plan costs will grow by $330.4 million or 50 percent in fiscal 2022.

Those demands, in conjunction with “ongoing structural gaps, will continue to weigh on our view of the city’s budgetary performance until addressed,” Standard & Poor’s said.

“We thus view Chicago as being at a crossroads. While we don’t expect the city to change course from finding structural solutions to address growing liabilities, the practical reality remains that Chicago needs to maintain the political will and resources to address the challenges or credit quality will also reverse its trajectory.”

The mayor’s budget appears to be headed for smooth sailing in the City Council.

That’s because a 28 percent increase in the monthly tax tacked on to Chicago telephone bills, a 15-cent increase in fee tacked on to every ride on Uber and Lyft and an amusement tax restructuring are the only major increases for Chicago taxpayers that aldermen must approve.

Thanks to the Il. General Assembly, there’s also a $3,000 increase in the homeowners’ exemption—from $7,000 to $10,000. That should soften the blow of a previously-approved, $63 million property tax increase for police and fire pensions.

Because of that increase and Year Two of a previously-approved, 29.5 percent surcharge on water and sewer rates, Emanuel can claim that he has tried his best to keep his hands out of taxpayers’ pockets.