Chicago’s mountain of pension debt increased by $558.7 million in 2018, but other vital signs of its finances showed improvement, according to an audited report issued Friday.
The report highlighted increased balances in the city’s operating funds and savings from refinancing expensive long-term debt. Jennie Huang Bennett, Chicago’s chief financial officer, said those changes are important to bond-rating agencies.
But the 2018 Comprehensive Annual Financial Report, with data audited by Deloitte & Touche, outlines the severity of the pension debt. Estimated at $28 billion, it constitutes almost all of the city’s long-term obligations of $29.4 billion.
State law mandates that the city increase its contributions to bring the four chronically shortchanged employee pension funds to a 90% funding level during the 2050s. City officials have estimated they need to nearly double the current annual pension contribution to around $2.1 billion in 2023.
“The pension liabilities and ongoing obligations are one of the greatest financial obligations we have,” Bennett said. “It’s not new.”
She said the administration is considering ways to address the annual spike in costs.
Mayor Lori Lightfoot, who took office in May, has raised the possibility of getting state authorization for a tax on high-end services such as lawyers or accountants.
Former Mayor Rahm Emanuel wanted to sell bonds to cover pensions and favored a long-shot constitutional amendment to permit a reduction in benefits.
In a letter to Chicagoans included with the new report, Lightfoot said, “While these costs loom large for next year and beyond, our administration will be looking at how city government functions to develop a sustainable roadmap for the future. As part of that, we will address our liabilities head on by fulfilling our pension obligations and making government work more fairly and efficiently for all our residents.”
The city under Emanuel turned to property taxes, water and sewer fees and a 911 surcharge on phone bills to help with pensions, but much more will be needed.
Bennett said the city is still calculating a potential budget gap for fiscal 2020. But she said better operations and an improving economy have helped the city’s main operating funds increase their balances.
The General Fund, covering most common city services, saw its balance rise $44 million in 2018 to $332.3 million, the report said.
Last year, the city issued $1.3 billion in bonds payable from sales-tax receipts, with the proceeds used to pay off higher interest debt, saving about $81 million. The bond sales and growing pension debt increased the city’s long-term liabilities by $996.6 million in 2018, the report said.
A similar refinancing of O’Hare and Midway airport bonds saved $21 million, officials said.
For the seventh straight year, auditors found no “material weakness” in the city’s financial statements, officials said.