Huge Dem-run city on verge of bankruptcy thanks to ultra-generous public sector pension scheme
A Midwestern city has fostered a rocky financial situation by offering extremely generous retirement benefits to public workers, experts say.
Chicago's projected budget deficit is a whopping $982.4 million, according to The Civic Federation.
Despite several tactics to save the city from bankruptcy, politicians have failed to get to the root of the issue - increasing pension payments to Chicago's more than 40,000 public employees.
'Retirement benefits are like free junk food to politicians - everyone loves them, and the bills don’t arrive until later,' Andrew Biggs, a senior fellow at the American Enterprise Institute, wrote in a New York Times opinions piece.
'They can be ruinous for a city’s long-term fiscal health.'
Democratic Mayor Brandon Johnson's latest attempt to reduce the city's debt - a proposed $300 million property tax increase - was shot down by City Council.
The City Council passed a budget this month with far less tax ramp-ups than Johnson wanted, Biggs explained.
In 2022, retirement benefits and debt service accounted for 43 percent of the city's budget.
Chicago has fostered a rocky financial situation by offering extremely gracious retirement benefits to public workers
In 2022, retirement benefits and debt service accounted for 43 percent of the city's budget
'In other words, Chicago is paying for the past, not investing for the future,' Biggs wrote.
There are several factors contributing to the pension problem, including the ages people are retiring, the amounts they are receiving, and the contributions workers made towards their retirement funds throughout their careers.
More than half of Chicago's city workers retire before they turn 60, Illinois Policy Institute reported in 2015.
Biggs said that a city employee retiring after 35 years with a final salary of $75,000 would get $77,000 annually between their pension and retiree health benefits.
The city is feeling the effects of their financial shortcomings.
Biggs referenced the massive corporations - including Boeing, Tyson Foods and Citadel - that have fled Chicago in recent years because of the state of Chicago's 'business environment' and 'public safety.'
Lack of funding has also resulted in depleted public service resources. The city's police force has declined by about 1,600 officers since 2018.
On average, 49 percent of 911 calls seem to go unanswered, the city's general inspector Deborah Witzburg found in a 2023 analysis, WGNTV reported.
Democratic Mayor Brandon Johnson's latest attempt to reduce the city's debt - a proposed $300 million property tax increase - was shot down by City Council
Growing pensions in Chicago have amplified the city's debt over the past several decades
Biggs painted a vivid image of the city's dire financial state.
He wrote: 'Chicago owes bondholders almost $29 billion. It also faces $35 billion in unfunded pension liabilities and almost $2 billion in unfunded retiree health benefits.
'And these figures do not include an additional $14 billion in unfunded benefits owed to Chicago’s teachers.'
The entire state of Illinois is experiencing Chicago's pension dilemma, according to the Illinois Policy Institute.
Over the past year, pension debt across the entire state has risen from $142.2 billion to $143.7 billion, nonprofit think tank group Illinois Policy Institute reported.
In 2023, more than 140,000 Illinois government workers and retirees collected over $100,000 in salaries and pensions, Muddy River News reported based on data collected by Wirepoints.
Biggs said that a city employee retiring after 35 years with a final salary of $75,000 would get $77,000 annually between their pension and retiree health benefits
The state's pension crisis has been in the making for decades, according to Wirepoints data from 2018.
Gov. Jim Edgar 'kicked the can far, far into the future' in 1994 when he enacted a law to try and fix the then $17 billion pension deficit.
But the plan only made matters worse, with the state's pension pay-off obligations now running through 2045.
'There may be no way for Mr. Johnson to get Chicago out of its fiscal mess without political and economic pain,' Biggs asserted.
'But he, and the rest of America’s big city mayors, have an obligation to try.'
