CHICAGO – A new report reveals Chicago’s unfunded pension obligations have more than tripled in the last decade.
The Civic Federation, a non-partisan research organization that works to promote efficiency within government programs in Chicago and Illinois, has released a new study detailing the dire straits of the Windy City’s pension crisis.
Citing inadequate employer contributions, declining investment income and fewer employees paying into the system, the Civic Federation says Chicago’s unfunded pension obligations have reached $37.3 billion.
That’s more than three times the unfunded pension liability the city faced in 2003.
When the city’s unfunded pension liability is added to state pension funds supported by Chicago residents, the total reaches $131.9 billion. Divided on a per-capita basis, each Chicago resident owes just short of $20,000.
Jeffrey Brown is professor of finance at the University of Illinois at Champaign-Urbana. He said the state — and Chicago specifically — have dug this hole by ignoring what was obvious for many years.
“It’s pretty clear what the issue is,” Brown said. “When you make bigger promises than you can possibly expect to keep, there’s going to be a shortage. When you have fewer people paying in than recipients, it shouldn’t be a surprise when the math doesn’t add up.”
Brown says state officials have kicked the can down the road over and over and they’re running out of time.
“It’s a tough sell politically,” he said. “But that doesn’t change reality. The math here is simple, and the pension shortfall is severe because we’ve ignored that math and opted out of making hard choices for years.”
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The study looked at each of the 10 various pension funds within the city and found they were funded at a rate of 45.5 percent in 2012 (the last year data is available), down by nearly 74.5 percent 10 years ago.
All 10 funds are now funded below 60 percent, according to the Civic Federation’s numbers, with the firefighters’ fund feeling the worst of the strain. It holds assets to cover only 24.4 percent of future promised benefits.
The Civic Federation’s report does not include potential alterations from the pension reform bill signed by Gov. Quinn that’s being battled around the court system.
Carol Portman is the president of the Taxpayer’s Federation of Illinois. She says the solution to closing the funding gap is probably one that won’t make many people happy.
“There’s going to have to be some give from both sides,” she said. “Employees are going to have to contribute a bit more and recipients are going to have to take a bit less. This will make everyone mad and be damaging politically, but what other option is there?”
State law requires the city of Chicago to make a $550 million payment into the various pension funds in 2016. To meet that requirement, the city has approved a 56 percent increase in telephone bill taxes and has discussed an increase in property taxes for properties within city limits.
Published with permission