K-12 Tax & $pending climate: Chicago pensions face insolvency in downturn, mayoral candidate says
Chicago’s underfunded pension system is in dire condition, with some funds at risk of becoming “completely insolvent” in a market correction, Chicago mayoral candidate Susana Mendoza warned.
“If the market gets a cold,” Mendoza said in an interview with the FT, “I don’t even know that we’ll survive with pneumonia.”
The remarks by Mendoza, currently Illinois’ top finance official, came as Chicago’s four city employee pension funds reported an aggregate funded ratio of 28.1 per cent last year, compared with a national average of 82.5 per cent, leaving the city’s retirement system among the worst funded in the US.
The warning highlights the financial pressures facing US public pension systems, many of which remain burdened by large unfunded liabilities despite several years of strong stock market gains. Chicago has also become a test case for how state and local governments may cope as cash-strapped public pension plans edge towards insolvency.
“Chicago’s pension crisis is extremely important to the rest of the country because everyone is kind of wondering what happens when the pension system is completely in a free fall,” said Zachary Christensen, managing director at the Reason Foundation.
