PROVIDENCE, R.I. (AP) — Rhode Island will face “extremely difficult” budget choices if it loses the court challenges to its pension overhaul, a prominent bond agency warned following the collapse of a proposed settlement.

Moody’s Investors Service called the failed settlement a “credit negative” for the state and municipalities in its weekly credit outlook report last week. The agency said it “prolongs uncertainty over the timing and cost of resolution of this bellwether pension reform” and risks some $400 million in savings annually.