Politics
Chicago’s Pension Debt Increased in 2025 to $36.4B: City Analysis
(Michael Izquierdo / WTTW News)
Chicago’s pension debt rose by approximately $500 million in 2025, according to the city’s audited annual financial report, with the amount the city owes to its four pension funds hitting $36.4 billion.
In all, Chicago owed 1.4% more to its four employee pension funds representing police officers, firefighters, municipal employees and laborers at the end of 2025 than it did at the end of 2024, according to Chicago’s 2025 Annual Comprehensive Financial Report.
Chicago’s pension debt has grown by nearly 11% since 2020, adding approximately $3.5 billion to the city’s debt, records show.
Even as the city’s overall pension debt increased between 2024 and 2025, the assets held by all four pension funds increased, mitigating the city’s overall pension crisis.
The fund designed to pay pensions to Chicago’s police officers is just 25.5% funded, while the fund that pays the pensions of the city’s firefighters is 25.2% funded, according to the city’s annual financial report.
The laborers’ fund has the highest funded level, at 44.1%, while the fund that pays pensions to municipal workers is 28.2% funded, according to the report.
By comparison, public pension funds in other large cities have average funding levels of about 70%.
The city’s pension crisis has eased somewhat since 2023, when the amount the city owed to the four funds hit a record high of $37.2 billion, records show.
That improvement is due in part to the approximately $689 million more the city has paid into its four pension funds than required by state law since 2023, according to the city’s annual reports. In 2025, the city paid approximately $228 million more than required into its pension funds, according to the annual financial report.
The city faces a record-setting $3 billion pension bill in 2027, 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 2025.
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 $732 million gap in the Chicago Public Schools budget.
Chicago faces a likely deficit of $1.16 billion in 2027, according to the city’s most recent budget forecast.
The majority of the increase in the city’s overall pension liability is due to a new law that took effect in August 2025 designed to ensure that Chicago police and firefighters’ pensions keep pace with retirement benefits paid to first responders in the rest of the state.
That bill, signed into law by Gov. JB Pritzker over the objections of Mayor Brandon Johnson, increased the city’s total pension liability by $300.4 million, according to the annual financial report.
The fund that pays pensions to retired police officers saw an additional liability of $157.9 million, while firefighters’ pension fund now owes an additional $142.5 million, according to the report.
That bill was designed to address the impact 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 meant 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.
Efforts to resolve that issue for employees who pay into the municipal and laborers’ pension funds 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.
Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]
