Illinois Policy Institute's analysis of Chicago pension crisis paints grim picture for taxpayers. From the Institute's press release:
Total pension and retirement-related debt across city and sister governments totals $63.2 billion, or $61,000 per household
CHICAGO (Sept. 17, 2013) – As Illinois grapples with a state pension shortfall of $100 billion, there is a second pension crisis looming right here in Chicago. A report released today by the Illinois Policy Institute finds that government agencies in Chicago have accumulated a combined $63.2 billion in pension and retirement-related debt.
This staggering figure totals more than $61,000 per Chicago household, and represents the combined pension and retirement debt of: city government, Chicago Public Schools, Chicago Transit Authority, Chicago Park District, the water district and Chicago's share of Cook County government agencies.
The Illinois Policy Institute's report also found that the financial viability of many of the city's pension funds are in serious question. The Chicago Police Pension Fund is just 31 percent funded. The pension fund for Chicago firefighters is only 25 percent funded – which means it has only 25 cents on hand for every $1 in promises made to current and retired firefighters.
"Because Chicago's pension systems have not been reformed, this massive pension debt is hurting Chicago's ability to provide core services," said Ted Dabrowski, vice president of policy at the nonpartisan Illinois Policy Institute. "The Chicago Public Schools have laid off thousands of staff and closed nearly 50 schools; the city's crime rate is among the highest in the nation. Chicago is at a tipping point and the time for reform is now."
Here are some highlights from the report:
- The state of Illinois is facing a pension shortfall of $100 billion.
- In addition to the state pension debt, governments in Chicago are facing a combined $63.2 billion in pension and retirement-related debt.
- The cost of Chicago governments' combined debt alone, not including the state of Illinois' pension debt, is more than $61,000 per household.
- The Chicago Police Pension Fund is among the worst-funded, with only 31 cents on hand for every $1 in promises made to police and retired police.
- In 1998, all the Chicago pension funds together were 84 percent funded; today, using official government numbers, they all are just 43 percent funded.
All the Chicago government pension funds are controlled by state government. Without action by the state legislature – which has already failed to reform the state's pension systems – Chicago cannot enact the pension reform it so badly needs.
"Chicago taxpayers don't deserve to keep funding a bankrupt pension system that is threatening the government services they rely on, and our city's police, firefighters and teachers don't deserve to keep putting their retirements into a retirement system that will soon be insolvent," the Institute's Dabrowski said. "Mayor Rahm Emanuel has called for reforms, including 'an element of choice' and he is right; what Illinois and Chicago need to do is follow the lead of the private sector and move retirements from this point forward to a 401(k)-style system. It's the only way to do right by both taxpayers and workers."