 Chicago households reeling from massive hikes in property-tax bills and the
specter of new utility-tax increases have yet another burden to bear – even
higher pension debt from the city’s four pension funds.
According to the 2015 actuarial reports of Chicago’s police, fire, municipal and
laborers pension funds, the city’s total pension debt grew by two-thirds in one
year. Chicagoans are now on the hook for $34 billion in city-run pension debt –
or $33,000 per city household. That doesn’t include billions in additional debt
Chicagoans owe to Chicago Public Schools and Cook County pensions. It also
doesn’t include long-term and government-worker health care debt owed by the
city, its sister governments and Cook County.
Each of Chicago’s fire and municipal funds now has less than a quarter of the
money needed to pay out future benefits. Chicago’s laborers pension system is
now only 33 percent funded, down from 64 percent funded in 2014. And the police
fund is only a quarter funded.
Chicago pension debt
By any measure, all four of Chicago’s pension funds are insolvent.
Even worse for Chicagoans, the city’s $34 billion pension debt will be even
larger when the police and fire funds properly report their numbers.
The police and fire pension funds’ 2015 numbers don’t reflect the pension “fix”
approved by the General Assembly in May, which allows Chicago to extend the
timeline of its payments to the police and fire pension funds. The 15-year
payment delay just kicks the city’s pension costs down the road again, but at a
cost to taxpayers of an additional $18.6 billion over the next 40 years.
Nor have the police and fire funds fully enacted new government accounting
standards as the municipal and laborers pension funds have. Those new rules
demand pension funds use more realistic assumptions when estimating how much
money they will earn on their investments. The adoption of the new standards
caused the municipal and laborers funds’ debt to double.
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 Assuming those new accounting standards affect the city’s police
and fire funds similarly, Chicagoans will actually be on the hook
for at least $44 billion in pension debt from the city’s four
pension funds, or more than $43,000 per household.
Chicago is finally being forced to be more realistic about its
pension debt, yet, due to the underestimated police and fire
numbers, city residents still don’t know the full extent of the
burden city-worker pensions are imposing on them. This shows just
how divorced from reality Chicago’s pension funds still are.
One thing is clear: Mayor Rahm Emanuel’s go-to solution, higher and
higher taxes, cannot solve the city’s pension crisis.
Chicagoans already face the highest tax burden in Illinois. Taking
even more money from city taxpayers will result in more and more
residents leaving the city – especially when Chicagoans know their
dollars won’t go toward new and improved services, but rather to pay
off old debt.
Only bold reform can stabilize Chicago’s finances, protect city
taxpayers, make government-worker retirements secure, and restore
confidence in the city’s future.
Bold reform means being honest about the true amount of the city’s
pension debt and overhauling pensions to provide new workers with
401(k)-style retirement plans and optional 401(k) plans for current
workers.
And it means stopping the out-of-control spending that has led to
the city’s growing debt burden and paying down existing debts in a
responsible manner.
That’s the path to bring the cost of city governance down to a level
Chicago taxpayers can afford.
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