Politics
Chicago’s Pension Debt Decreases $1.3B in 2024 to $35.9B: City Analysis
Chicago’s skyline. (Michael Izquierdo / WTTW News)
Chicago’s pension debt dropped by approximately $1.3 billion in 2024, according to the city’s audited annual financial report, the first time in five years that the amount the city owes to its four pension funds decreased.
In all, Chicago owes $35.9 billion to its four employee pension funds representing police officers, firefighters, municipal employees and laborers, according to the 2024 Annual Comprehensive Financial Report. That is 3.5% less than what the city owed at the end of 2023, according to the report.
However, Chicago’s pension debt has grown by nearly 13% since 2019, adding approximately $4.1 billion to the city’s unfunded liabilities, records show.
As the city’s overall pension debt dropped between 2023 and 2024, 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 and firefighters each have funding levels of approximately 24.5%, while the fund that pays the pensions of municipal workers is 26% funded, according to the city’s annual financial report. The laborers’ fund has the highest funded level, at 42.6%, according to the report.
That represents an increase of 1.4% in the combined pension funded ratio between 2023 and 2024, officials said.
By comparison, other large public pension funds have average funding levels of about 70%.
“These funding levels are, as we all know, not high enough, but it’s a significant turnaround to see them stabilizing and actually going up,” Chief Financial Officer Jill Jaworski told reporters Monday during a virtual news conference about the release of the annual financial report.
That improvement is due in part to the $802 million more the city has paid into its four pension funds than required by state law during the past three years, Jaworski said.
The city faces a nearly $2.76 billion pension bill in 2026, 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, according to an estimate from August 2024.
The fact that the city’s pension liability did not grow during the previous year will only slightly ease the pressure on Mayor Brandon Johnson to bring Chicago’s expenses in line with its revenues.
Chicago’s finances have long been out of whack, pinched by soaring pension costs, spiraling personnel costs and a massive amount of debt. The city’s fiscal stability is also threatened by the crises facing the Chicago Transit Authority and the Chicago Public Schools. Both agencies survived the COVID-19 pandemic with federal financial assistance and must now stand alone.
Chicago faces a likely deficit of $1.2 billion in 2026, according to the city’s most recent budget forecast.
The city’s pension liability reflects the impact of a new law designed to ensure that Chicago police and firefighters’ pensions keep pace with retirement benefits paid to first responders in the rest of the state, Jaworski said.
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.
Efforts to resolve that issue have been stalled for more than two years, even as Democrats control the Illinois House, Senate and governor’s office and the Chicago mayor’s office.
Those changes are certain to increase the pension funds’ unfunded liabilities, Jaworski said. That will require Chicago to pay more into its pension funds and ensure they remain solvent.
“We know that’s going to cost us more money,” Jaworski said. “We think that it’s relatively manageable.”
Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]
