k-12 Tax & $pending Climate: Chicago’s pensions had a great year, but that won’t save them
Chicago’s pension funds just had the kind of year that’s supposed to fix things. Returns came in between 11% and 14%. Contributions hit records, including $272 million in supplemental payments. And yet, according to the city’s annual financial report, our pension debt grew — up $500 million from what the city reported last year, to $36.4 billion. If a banner year cannot reduce that shortfall, it’s fair to ask whether this system is sustainable.
That said, there was some improvement. The funded ratio rose from 25.4% to 28.1%, driven by asset growth of 14%, while liabilities grew just 3%. The catch is scale: The funds hold only $14 billion of assets against $51 billion of liabilities.
At that size, more than $3 billion went just toward servicing existing obligations, consuming nearly every dollar the city and its employees paid in. Real progress belongs to the funding schedule: For example, the police fund is now on pace to hit its statutory funding target. But that schedule only works by growing the taxpayer’s bill every year for decades.
As a result, pensions are crowding out spending on essential services. In 2025, the city paid $2.9 billion into its four funds — 23.5% of its entire operating budget. Over $900 million came from the $6 billion corporate fund — the discretionary pot at the center of recent spending fights. Property taxes tell the same story: Over 80% of the city’s portion of the levy goes toward pensions.
