Chicago’s pension albatross
Chicago’s four public employee retirement funds are short nearly $20 billion. Each pension fund has just a fraction of the amount it needs to pay promised benefits.
Consider these funding percentages:
* Police: 30 percent
* Fire: 24 percent
* Municipal Employees: 37 percent
* Laborers: 57 percent
* Total: 35 percent
Chicago’s three massive bills now due
* $550 million: By law, the city must determine in 2015 how to contribute $550 million more toward the police and firefighter funds in 2016.
* $300: The city’s estimated budget deficit for 2016. The budget must be passed this year.
* $50 million (at least): New revenue owed by to the Municipal Employees and the Laborers funds that must be budgeted in 2015.
— Total bill: $900 million (to be paid with new revenue or by cutting expenses)
Chicago’s main funding source for pensions is property tax revenue. In 2015, the city expects to draw in about $830 million from property taxes. About 43 percent of that money goes to pensions; about 45 percent goes to pay other city debts, according to the city’s 2015 Budget Overview.
Chicago’s plummeting credit rating
Because of the city’s weak finances, driven by its massive pension debt, rating agencies over the last few years repeatedly have downgraded Chicago’s bond rating. This drives up borrowing costs. Only Detroit has a worse rating. Moody’s Investors Service rates Chicago two levels above junk status.
Chicago Public Schools skyrocketing pension bills
The Chicago Teachers Pension Fund also is severely underfunded, with just 52 percent of the funds needed to pay promised benefits. After a three-year pension holiday, CPS’ pension bills jumped exponentially in 2014 — by $400 million — and continue to grow every year. CPS’ 2016 bill is $688 million, accounting for more than half CPS’ projected $1.1 billion deficit, CPS officials report. The school system’s total operating budget is $5.8 billion.