Chicago has been carrying on as though no reckoning would ever arrive for its chronically underfunded pensions, but is everyone awake now? Chicago’s four public pension funds are among the nation’s most underfunded, with more pension debt than 44 states, according to the Illinois Policy Institute. The city carries more than $35 billion in pension debt and a credit rating barely above junk status.
In July that didn’t stop Springfield from throwing gas on the fire for public unions. Against the advice of budget watchers, Democrats passed a bill to increase pension payments for Chicago police and firefighters that added billions of dollars to pension liabilities and tanked their funding ratios.
They knew what they were doing. In a memo emailed to Deputy Governor for Budget and Economy Andy Manar in July, Chicago chief financial officer Jill Jaworski explained that the proposed changes in the pension benefits would reduce the funded ratio for both the police and firefighter funds to under 20%. “Many actuaries consider a funded ration under 20% to be technically insolvent,” she wrote.
Ms. Jaworski said city contributions to the funds would increase by an estimated $60 million in the first year and add $6.6 billion to city contributions over 30 years. And while the bill was supposedly designed to bring city safety workers into parity with their downstate peers, the city workers aren’t required to pay the same share of their payroll toward pensions. The bill “makes no provision for funding the enhanced benefits,” she wrote.