\n\t\t\t\tIf Chicago\u2019s pension systems become insolvent, the city will have to reduce benefits or make serious cuts to city services. The only way out is constitutional reform.
\n\t\t\t<\/p>\n
Pension insolvency isn\u2019t a distant hypothetical for Chicago: the city is setting itself up to be consumed by pension obligations.<\/p>\n
Chicago\u2019s four pension funds have more combined debt than 44 states<\/a>. Seven of the nation\u2019s 10 worst-funded local pensions are in Chicago.<\/p>\n To make matters worse, the state recently passed a police and fire pension sweetener that adds $11 billion<\/a> in new liabilities. Some estimates say these benefits have dropped the funding ratio for Chicago police and fire pensions to 18%<\/a>.<\/p>\n In mid-September, Mayor Brandon Johnson had to dip into the city\u2019s cash reserves to cover $28 million<\/a> in payments for the fire pension so they wouldn\u2019t have to sell off assets.<\/p>\n All of that adds up to a city that must grapple with the realities of pension system insolvency.<\/p>\n<\/p>\n A pension system becomes insolvent when it no longer has the money needed to pay out benefits. Right now, Chicago pension funds only have between 22 cents and 52 cents on hand for every dollar they must eventually pay their members.<\/p>\n Those benefits aren\u2019t all due at once, but if funding levels are low enough it can make a system \u201ctechnically insolvent.\u201d<\/a> That is how Chicago\u2019s Chief Financial Officer Jill Jaworski described Chicago\u2019s police and fire pensions to a top administrator in Gov. J.B. Pritzker\u2019s office before the pension sweetener was signed into law.<\/p>\n After decades of poor financial decisions made by the city, technical insolvency could soon turn into real and total insolvency. So, if Chicago\u2019s pension funds become insolvent, what happens to retirement benefits?<\/p>\n The Illinois Constitution prevents<\/a> adjustments to benefits once enacted, even reasonable limitations such as a temporary reduction on how quickly future benefits can grow. That can leave public pensioners feeling temporarily secure in their retirement funds. Insolvency would eradicate<\/a> that safe feeling, exposing retirees and taxpayers to ugly options.<\/p>\n It is highly unlikely a court would be able to force<\/a> a city to make pension benefit payouts if there is not enough money in the pension fund to cover them. That would leave pensioners with massive benefit reductions based on whatever money is left.<\/p>\n The city could choose to use more of its budget to make up the shortfall and continue paying out pension benefits each month. However, that would come at a severe cost to other city services and personnel, which would need to be cut to make up the difference.<\/p>\n The city could also figure out how to put the burden on taxpayers in a city infamous for already imposing high taxes through a litany of creative schemes. Chicago is now looking at 39 new ways to extract another $1.65 billion<\/a> in taxes and fees.<\/p>\n Chicago would become less of a vibrant city and more of a machine for keeping the pension systems alive.<\/p>\n Both Mayor Rahm Emanuel and Mayor Lori Lightfoot ended their terms urging<\/a> Springfield to pursue constitutional pension reform. Mayor Brandon Johnson needs to do the same.<\/p>\n Continuing to borrow money from a nearly empty<\/a> city reserve fund and denying that Chicago has a spending problem<\/a> won\u2019t cut it. Illinois needs a statewide vote on constitutional pension reform so the growth of future benefits can be controlled \u2013 both for the benefit of retirees and taxpayers.<\/p>\n","protected":false},"excerpt":{"rendered":"
If Chicago\u2019s pension systems become insolvent, the city will have to reduce benefits or make serious cuts…\n","protected":false},"author":2,"featured_media":199171,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":{"0":"post-199170","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-ca","10":"tag-canada","11":"tag-finance","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/199170","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=199170"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/199170\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/199171"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=199170"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=199170"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=199170"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}