By: Ted Dabrowski and John Klingner
We have a big problem in Chicago. The city’s public safety pension funds have an obligation to pay $68 billion in pension benefits to police and firemen over the next 30 years. To meet those future obligations, the funds need $26 billion in investments right now.
But the funds have just $6 billion in assets today. Absent a bailout, the pension funds will never have enough money to meet their obligations.
And yet – unbelievably – Illinois lawmakers have passed a new bill to make things worse. They’ve increased the obligations of those pension funds by sweetening the benefits of police and firefighters hired after 2010 – so-called Tier 2 workers. If Gov. J.B. Pritzker signs the bill, that $68 billion obligation will jump by several billion, to something over $70 billion.
But assets on hand? Still $6 billion. Meaning the funds will be even more broke.
Illinois lawmakers may think they’re supporting public safety workers by increasing their benefits, but they’re not. Their actions are harmful. The bill only makes it more likely that public safety pension checks will get sliced in the future.
Today, the police and fire pension funds already have a dismal funded ratio of just 25%. But if the bill becomes law, the funding ratio will fall to an even worse 18%, according to the city’s actuaries.
And that 18% is based on rosy projections that the pension funds will consistently get investment returns of 6.75%.
A more realistic assumption is that the funds will be forced to invest more prudently given how little money they have. And that means the funded ratio of the plans is more likely in the low teens.
It’s hard to believe that lawmakers would pass something this destructive for our public safety workers. And that Pritzker would sign it into law.
We’re huge supporters of our public safety workers and the work they do to protect us. Their retirement security shouldn’t played around with like this.
Read more from Wirepoints:
- Dabrowski & Bachrach Op-Ed: JB Pritzker Presides Over an Illinois Pension Mess
- Chicago pension sweeteners: Threatening public safety retirement security, soaking future Chicagoans
- Common sense prevails for once in the Illinois statehouse
- Chicago’s black hole: Pension debts jump even though taxpayers pour billions into city funds
Appendix.
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
PPF, what say you?
In the near term, taxes will rise and more articles will be written about the underfunding.
Long term, maybe one day Chicago will seek bankruptcy. When that happens, taxes will rise some more and other spending will be massively cut. Massive cuts in spending on police, fire, and other public workers. Thinks layoffs and salary freezes. Bondholders taking a massive haircut and perhaps pensions getting a Detroit style cut around 5% Think New York City during the 1970s. Increased taxes and fewer services provided.
PPF, One word for all of your SILLY statements that taxes will be raised to pay for these golden public section pensions in Taxistan.
STOOOOOOOOOOOOPID!!
Illinoisians, including your beloved public sector union stooges are running for the border at an ever increasing number.
I know math is hard for you but a 5th grader could do this math.
Da Judge
You’re long on unmoored hatred and short on any compelling logic as support. Try again, sport. By the way, 5th graders generally aren’t all that astute at math either.
Your view seems based on the conviction that voters are stupid. However bankruptcy is a fix for most of what ails municipalities and once that becomes clear voters can clean the Springfield stables at the ballot box as a first step in purging the city and union halls. Grim Satisfaction will displace hatred and buoy moods state- and nation-wide. Public Servants will get over it while looking for work and collecting unemployment.
James, Do you know the difference between correlation and causation?
All this malpractice piles up and drives both people and businesses away. Illinois has lost nearly 1.6 million net residents to out-migration since 2000, the nation’s third-worst loss on a per capita basis. Blue-chip companies like Boeing, Caterpillar and Citadel have all moved their headquarters out of Illinois. And don’t forget the opportunities lost as Mr. Buffett and other investors balk at the financial mess Illinois remains in.
Casusation – Higher and higher taxes!!
Good answer. Surprised?
What about pension debt? What about the billion dollars in interest on this debt?
This is a train wreck and the tax payers are on the hook for it all !
and don’t forget virtually every DOA worthless republican in house & senate vote in favor of this scam. Make no mistake from city hall to Rep or Dem Springfield, to fake progressive equity hustler CTU/Brandon & crew, to weaselly pay-to-play con artist martwick, to martire, to miller, to fake lib st/wbez types THESE PEOPLE DON”T FEEL “fighting for the working class” SORRY FOR YOU , THEY HATE YOU WITH AN UNMITIGATED PASSION!!!
All of a sudden starting to sound a lot like Rahm & Lori, you even have CTU/Brandon making a squirrely statement on this pension sweetener and perhaps city pension benefits in general as unaffordable without “progressive revenue” from state….a little late Brando…a little late useless press for even challenging the pols to make a statement. (https://www.thecentersquare.com/illinois/article_212b002b-dc9e-4a8e-928d-28ba43f61d10.html)
kudos to G Bishp/ the Center Square for being only one reporting on this.
Absolutely rock-bottom sickening.
It would seem that there is no legal way to force funding — otherwise lawsuits would have been filed years ago. I expect this situation results from “separation of powers “ so that a court can’t force a legislature to appropriate funds. PPF’s ingenuity is sorely needed.
Overpromise, underdeliver. It’s the Mayor Johnson motto!
WP is again right on point. You need to get this “$68B out of $6B in assets” message into popular discourse in some way. You are getting play in the WSJ, which is great; and I don’t know how to get Chicago’s government-captive media to report on this. I know the $68B aren’t due today, but the stark $68B vs $6B is nice and not wrong. That plus “needs $26B now” makes it fair.
Would apples to apples be “$32B needed and we have $6B”? It is stark, and the simpler the better.
Too bad that don’t have a tax cheat Marxist like Gates to carry their banner and stomp her feet and cry racism to advance their cause.
A picture is worth 1,000 words. This is DOA.
Be shocked if Pritzker didn’t sign – totally beholden to public union Bosses.
He won’t sign he will just let it become law after 60 days.
“To meet those future obligations, the funds need $26 billion in investments right now.”
Someone may correct my math, but that alone looks like 18 months of the City of Chicago’s total spending.
Chicago’s spending practices are unsustainable. Tax rates already drive out residents and employers. Cut spending now or cut it in federal bankruptcy court.
I’m confused, I thought the Tier II “fix” was $11 bil over an unknown period of time? but this article is stating cost at $2 bil over an unknown period of time?:
We haven’t seen the actual calculations yet (nobody has released them), but what the trib said was about $7 B in bigger contributions and about $11 B in additional liabilities. I’m not sure what the actual number is, so waiting. But I know the overall liability will be over $70 B.
Absolutely beyond moral bankruptcy outrageous– that state would pass this disaster and JB might sign without actual calculations! If it goes thru what more evidence do chombolones need to know that from Springfield to city hall nobody give a rats-ass about you or your hardscrabble equity.
Dummy chumbolne me, but I thought any legislative pension benefit change/ enhancement would have to require completed actuarial analysis?
God bless WP – the only media outlet in IL that presents facts on the Democrat created pension mess in Chicago and IL.