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By: Ted Dabrowski and John Klingner

You can’t help but call it a Ponzi scheme. Not if you look at Chicago’s collapsing demographics and consider how they’re threatening the solvency of the city’s government-run pensions. Chicago households are on the hook for more than $145 billion in state and local retirement debts and there are fewer and fewer people left to pay them.

Consider first Chicago’s falling population. The city’s metropolitan population has fallen four years in a row. It’s the only top-ten city to shrink like that. In all, the Chicago MSA lost 66,000 people between 2014 and 2018.

A falling population means the city’s massive pension debts are falling on a smaller base of taxpayers. That’s bad news enough.

But another key demographic – the ratio of active government workers to pensioners – is even more concerning.

That ratio, which equaled 1.4 actives for every pensioner in 2005, has collapsed to nearly 1.05. And if the trend continues, in just a year or two there will be more pensioners draining money from the pension funds than active workers putting money in.

The problem is compounded by the fact Chicago households can’t afford the amount of pension debt that’s been racked up by state and local politicians.

Spread out the $145 billion in overlapping government pension and retiree health care debt – from the city, the Chicago Public Schools, Cook County governments and the state – and each Chicago household is, on average, on the hook for more than $139,000 each. It’s an insane amount and it’s tabulated in the following graphic. (Retirement debt calculations are shown based on both official and Moody’s-based estimates.)

What’s fascinating is that Illinois politicians think Chicagoans will willingly pay off that debt no matter what.

They’re oblivious to the fact that more residents may just choose to slip right over the border. It’s a rare case where you can simply walk away from a massive debt without being arrested and/or having your assets taken away from you.

Illinois politicians are also arrogant enough to think that out-of-staters will continue to move into Chicago and just assume new debts the size of a mortgage, but with nothing to show for it.

Chicago’s pension plans are already deeply in debt and functionally bankrupt. That’s particularly true for the municipal, police and fire pension funds, which are about one-quarter funded.

A recent analysis by Wirepoints found that at the end of 2017, the police fund had only enough assets cover the next four years of payouts. In contrast, the fund’s assets in 2000 were enough to cover the following 13 years of payouts.

Chicago is losing the demographics game as its retirement debts get ever-bigger. It’s hard not to call this a Ponzi scheme orchestrated by Illinois politicians. The question is, how fast does it fall apart?

Read more about Chicago’s financial crisis:

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E

The pursuit of the legalization and sales of marijuana and land based casinos by the City should be of PARAMOUNT importance.

Amy Riva

If you think that Marijuana sales and casinos will take care of this debt you are truly stoned. Marijuana can be grown anywhere legally or not. Its not a rare commodity and casinos are already popping up everywhere. What you are wanting is more crime, and more debt. Really…smoke another one there Einstein

DantheMan

Correct Amy. Liberal/Socialist politicians always try to redirect the deficit discussions to this subject knowing the Chicago/Illinois general public is too uninformed to realize that it will only marginally add revenue. Apparently, “E” (above) has successfully been mislead by these politicians.

Charles L Ford

Funny, the Chicago Police Pension fund has been in existence since 1918, and it has operated under the same formula since then to this day. Officers contribute 9% of their salary into the fund every pay day and the City has the fiduciary responsibility to match or exceed those funds. What is always left out of these Pension stories is how the City for almost 20 years failed to match those officers contributions and basically refused to meet their fiduciary responsibilities, yet somehow it is the “Greedy Police Pensioners” who are to blame? Also, this bogus article mentions “retiree health… Read more »

DantheMan

1) Nowhere in the article did I see the term “Greedy Police Pensioners”.
2) Nobody is arguing the fact that the city grossly underfunded it’s share of the pensions.
3) The central point of the article is that each year more money is taken out than is put in, hence the pension funds will eventually not have enough money to meet their obligations.

Amy Riva

the “eventually” began years ago

nixit

Over 50 years ago, Chicago police officers couldn’t retire with full benefits until age 57 with 20 years of service. Today, it’s 50/20. Add on an additional 6 years of life expectancy gains and you’ve got police officers pulling pension benefits at least 13 years longer than they did in 1969.

Sean

Where was the union,this gos for the firefighters and others. Why did they let the politicians not pay into each fund!

John

Do the math… it’s all about the numbers.
Determine the actual longevity of the plan by current payouts and then figure out how much more current employees are going to increase their payroll deposits into the pension and then how much the retirees will have to take a cut, to keep the pension solvent.
Both the pensioners and current employees have NO choice.
Cooperate, or lose it all.
However, the formula must be computed by a non political, licensed, bonded and insured audit company.
THAT IS ALL.

Ann Frances

Good luck finding someone without political ties and looking for a handout.

Charles L Ford

You do the Math, the Chicago Police Pension Plan has remained the same since 1918, how comes it, all of a sudden it is defunct? Why is the City crying about not enough officers paying into the plan when they have budgeted 13,000 sworn personnel and then only have 8 or 9 thousand tops, where does all the rest of those budgeted Police salaries go, Hmmm?

Michael

I am sure John Gallagher had a hand in depleting capital from the pensions, just as he has been doing to police and fire here in Ohio since 2012/2013…….

Jules

Why did Democrats become such lunatics? Where did all of the Kennedy, old-school Democrats disappear to?

Chris Harris

Their is no doubts in my mind that’s why the mayor left and he gave them raises before he left also…they don’t care

Byebye

Once my kids are out of school, we’re gone… Years of cronyism and liberal policies have destroyed this state… How do the acolytes of AOC and her ilk not see this?

Downstate_downtrodden

Simple, nobody ever taught them that there’s no such thing as a free lunch. That’s why they gutted the education system. If the kids don’t know any better, they’ll keep voting for us…

Freddy

In a Ponzi scheme you continually need more new investors to pay the older investors. In Chicago’s case and elsewhere there are no New investors because of outmigration so taxpayers are forced to fund this scheme with ever increasing tax’s until someday soon they band together and say Enough is Enough!!

Ken h

You have flunkys and buffoons as Trustees…what. Did. You. Expect???

Douglas

I thank you guys for this type of reporting. Everyone is oblivious to the severe financial/debt problems IL and its local municipalities are incurring. The chickens will come home to roost, and it won’t be pretty.

S and P 500

Elizabeth Warren announced her plan for free college and student loan forgiveness. The student loan forgiveness will add around one half trillion dollars to the national debt and the free college will never work because of state and university unfunded pension liabilities. The “tax the rich” part doesn’t make sense either because many states such as Calif. already depend mostly on rich people to pay their state income tax.

Rick

Mr. Ponzi was only able to scheme while he had a money supply of chumps. Ponzi schemes only end when the momey supply ends. I n chicago and Illinois Moody’s, and the other rating agencies ensure the money supply into the ponzi continues. Until the day that supply ends the pomzi will live. Its borrowed money, sure the govt takes a yearly haul from taxes, but every year they borrow too. Until the bondholders get a haircut it will be ponzi time.

NB-Chicago

Great writing..realize it would be a ton of work but sure wish some news/research outlet could file the foias to find out what part of country all those city retiries ard collecting there giant checks. Pollitically think such a study could go a long way

DantheMan

The typical Chicagoan has no clue about the massive s***storm heading their way. The typical Chicagoan deserves it.

Red Raspberry

No wonder they don’t want Chicago to be it’s own state.