Video: The WTTW News Spotlight Politics team on Chicago’s pension debt and more of the day’s top stories. (Produced by Alexandra Silets)
Chicago’s pension debt soared by approximately $1.8 billion in 2023, according to the city’s audited annual financial report, raising the pressure on Mayor Brandon Johnson to bring Chicago’s expenses in line with its revenues.
In all, Chicago owes $37.2 billion to its four employee pension funds representing police officers, firefighters, municipal employees and laborers, according to the 2023 Annual Comprehensive Financial Report. That is an increase of approximately 5% from 2023, according to the report.
“While the city still faces several long-term structural challenges, we are charting a better path forward,” Johnson said in a June 28 letter included with the 2023 annual report.
The city’s pension debt has risen by 5% in each of the last two years, according to city data.
That jump is largely due to the impact of inflation and rising interest rates fueling global market volatility in the city’s investment returns, according to the report, and comes despite efforts by city officials to confront Chicago’s massive pension debt.
The annual financial report reflects the Chicago City Council’s approval of a plan crafted by former Mayor Lori Lightfoot to contribute an additional $242 million to the city’s four pension funds in January 2023. Johnson continued that policy, and the city’s 2024 budget included an additional pension payment of $306.6 million.
The city faces a $2.74 billion pension bill in 2025, according to city records, in order to comply with a state law that requires two of Chicago’s funds be funded at a 90% level by 2055 and the other two by 2058, ensuring they can pay benefits to employees as they retire.
While the city’s overall pension debt grew between 2022 and 2023, the assets held by all four pension funds increased, mitigating the city’s overall pension crisis.
The funds designed to pay pensions to Chicago’s police officers, firefighters and municipal workers each have funding levels of approximately 22%; the laborers’ fund has the highest funded level, at 39%, according to the city’s annual financial report.
Chicago’s four pension funds have a combined funded level of 26%, which is significantly worse than other large public pension funds, which have average funding levels of about 70%.
More than a year ago, Johnson formed a working group to craft a comprehensive plan to address Chicago’s pension debt, which threatens his ability to fulfill his campaign promises to fund new investments designed to boost working class Chicagoans, particularly on the West and South sides.
But that group failed to craft a plan, and state lawmakers took no substantive action on pensions during the recently concluded spring session.
The most pressing pension-related issue for state lawmakers is the unanticipated result of a 2010 law that cut the cost of pensions offered to newly hired state and city workers as part of a pension reform plan, known as Tier II.
The cuts included in that law mean that retirement benefits for some workers will begin to fall below the minimum federal standard set by the Social Security Administration, forcing state lawmakers to craft a fix that could be painfully expensive.
Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]
