Nearly 27 years ago, many public servants in Chicago’s school system and in Illinois were promised what seemed reasonable at that time of high inflation.

Lawmakers in Springfield agreed that pension payments would compound by 3 percent every year for retired city public school teachers and for participants in five state government retirement plans.

Ten years later, in 1999, members of the city of Chicago’s Laborers and Municipal Employees pension funds received the same promise.

It’s turned out to be a more than square deal for public employees.

OPINION

The increases often are referred to as cost of living adjustments, or COLA. But the 3 percent annual hikes in pension payments have far outstripped inflation, according to U.S. government data.

That’s been especially true for the past few years. The actual cost of living as measured by the federal Consumer Price Index went up just 0.1 percent last year. It followed modest rises of 1.6 percent in 2014, 1.5 percent in 2013 and 2.1 percent in 2012.

You have to go back to 2011, when inflation was 3.2 percent, for the last time the cost of living in this country increased at a faster rate than pension payments for many Chicago and state retirees.

And this isn’t merely a recent trend. In only six of the past 24 years has the rate of inflation been higher than 3 percent.

Pensioners have come out far ahead. Let’s take the example of a public employee whose pension was $40,000 upon retirement in 1999.

Factoring in the 3 percent COLA, his or her pension would be $66,113.91 this year.

Had those pension payments grown at the rate of inflation, though, the annual amount due to the employee would be $57,445.62.

Some public pensioners, including former Chicago police and firefighters and retired park district employees, instead get increases based on simple interest rather than compounded interest. Even so, their pensions have outstripped inflation. A cop or firefighter who was entitled to $40,000 a year upon retirement in 1999 is getting about $60,000 a year in pension payments now.

It’s easy to see why COLA’s effect on public finances has been as toxic as the effect of cola drinks for a diabetic.

A third of the state’s unfunded pension liability of $110 billion is due to the 3 percent compounded increases in pensions, says Laurence Msall, president of the nonprofit Civic Federation.

“Nothing drives Illinois further away from everyone else than the 3 percent compounded,” he says. “Most states do it based on simple interest. Only Illinois does 3 percent compounded annually.”

Politicians made the commitment but never figured out how to pay for it all. Now there appears to be little that can be done about the situation, because of the unequivocal protection for pensions in the state constitution.

But if there’s no money left in pension funds, what value would those promises have?

Making the situation worse still are expectations that pension funds will earn investment returns of as much as 8 percent a year. Returns for the city’s four pension funds “ranged from -1.5 percent to +1.8 percent” in 2015, according to Moody’s Investors Service.

In a statement Friday, the Wall Street bond-rating agency said Mayor Rahm Emanuel’s plan to delay increasing funding for police and fire pensions will cost the city dearly in the long run.

The mayor’s office responded with a churlish statement accusing Moody’s of possibly harboring “a desire to hurt Chicago, rather than help it thrive.”

There’s no apparent reason why that would be. Moody’s is simply stating the grim facts.

You’d have to be drinking something far stronger than cola to not see how bad things are for the city and the state.