Chicago’s Immense Pension Debt

July 29, 2023

Chicago’s pensions remain among the worst-funded local retirement systems in the nation. The four city-sponsored pension systems – municipal employees, laborers, police officers, and firefighters – along with the Chicago Teachers’ Pension Fund, hold more debt than 44 states combined.

According to data provided by the Equable Institute, these funds have a combined pension debt of nearly $48 billion. This figure represents the retirement funds that are most directly paid for by Chicagoans, primarily through property taxes.

More than 80% of Chicago’s property tax levy – including all automatic annual increases- goes to pensions. The Chicago Teacher’s Pension Fund even has its own property tax levy specifically dedicated to those pensions. The city’s property tax levy has doubled in a decade and shows no signs of reversing.

Making matters worse for the city’s pension funds, each of the five major systems are also among the worst funded in the nation. Per the Equable Institute’s most recent data, only one local pension system in the nation has a lower funding ratio than all of Chicago’s core systems. The funding ratio reflects a fund’s available assets compared to its liabilities.

Experts warn that funding levels below 60% are very unhealthy and can be considered “deeply troubled”. By those standards, all of Chicago’s core pension systems can be considered deeply troubled, as none of them have a funding ratio above 47.6%.

Chicago recently announced it is in the process of opening a new casino with the intent to use its revenue to pay down significant unfunded liabilities in the city’s public safety pension plan. According to estimates in the recommendation report by former Mayor Lori Lightfoot’s office, the casino will cost around $1.7 billion to build and generate roughly $200 million per year.

Even under this proposal’s optimistic outlook, the casino’s annual revenue is only a fraction of the annual required contributions to the city’s police and fire pension fund. Due to the overwhelming amount of unfunded liabilities the city already has, this move is unlikely to mitigate future tax hikes, and a significant effort to fulfill the pension promises made to workers still lies ahead.

For more information on what Chicago’s immense pension debt could mean for you and your property taxes, contact the qualified attorneys at Rock, Fusco & Connelly, LLC.