Download a pdf of this report and chart here.
Chicago residents face twin financial crises at Chicago Public Schools and City Hall, driven by the costs of public employee pensions. The steep tab for the retirement benefits of school and city employees is coming due. More retirees than ever are collecting pension checks. And state law will soon require the City and CPS to put aside a lot more money each year.
As local pension costs soar, the school system and city government must divert funds from their operating budgets. Some city lawmakers are hinting that tax increases would be needed in order to cover the shortfall caused by increased pension costs. If true, Chicago residents could be looking at a very big increase in sales and property taxes.
The graph below shows the required pension payments that CPS must make to teachers and what the City must make to firemen, police, laborers and municipal employees.
The combined pension costs in 2011 to CPS and City Hall are approximately $650 million, a significant 5 percent of their combined 12.7 billion budgets. By 2015, the required payments to pensions funds will have increased to $1.12 billion.
Over the course of the decade, the required payment to local pension funds will triple to $1.927 billion, from today’s already cumbersome $650 million. A fiscal disaster is brewing, barring a significant change to state pension laws.
Source: Commission on Forecasting and Government Accountability; calculations and graph by Collin Hitt, Illinois Policy Institute. Note: as of this writing, projections after 2015 for Fire, Police and Municipal workers funds are only available from in five year intervals.
See all of the Illinois Policy Institute's recent research on public employee pensions.