A report set to be released today by the Chicago Civic Federation, shows that the massive unfunded pension liability of the city and county’s 10 public pension plans has reached nearly $23 billion. That amount, plus Chicago’s share of the state’s unfunded pension liability, adds up to a total of $11,934 owed by every man, woman and child in Chicago.
Ten years ago, the combined city and state unfunded pension liability amounted to $2,442, only one-sixth the current amount.
The report from the Civic Federation comes to the same conclusions as a series of stories reported in the Chicago Tribune in November about the massive debt owed by city residents and taxpayers.
In 2000, eight of the 10 pension funds, were funded over an 80 percent level; now, eight have fallen below 60 percent. Despite the precarious position of the funds, only recently has pension reform become an urgent issue with Illinois Gov. Pat Quinn and the legislature.
The two funds that were above the 60 percent funding level in 2009 are the Chicago Transit Authority and the city’s labor union. The only reason the CTA was above that level was because of an emergency infusion by the state in 2008 to keep the plan from becoming insolvent.
The Civic Federation blamed the deficits on the Illinois pension code, which allows the state and local governments to avoid having to pay in actuarial –determined contributions each year.
Making the problem worse are the steady increases in benefits, early retirements incentives and the weak economy. The ratio of active to retired workers has also decreased by 75 percent since 2000, meaning that as more retired workers need to be paid, fewer workers are paying into the system.
Even though the funds have experienced large investment gains over the last year, there is no way that investment performance can restore the funds to solvency.
The only two options are raising taxes, or sharply cutting back on retiree benefits. So far, politicians seem to prefer taking the risk of angering the public by suggesting hikes in property and income taxes, instead of incurring the wrath of the public employee unions.
Information from: Chicago Tribune