Chicago shorts pensions by over $440M a year despite $2.3B hike in spending

Chicago’s public pension contributions remain lower than what actuaries say is needed to pay benefits despite a nearly six-fold increase in spending since 2014. Pension problems are driving high property taxes ever higher.

Skyrocketing pension costs have been the primary driver behind Chicago’s rising property taxes for the past decade, but the city is still $440 million a year shy of what it should contribute.

Since 2014, Chicago’s annual pension payments have increased nearly six-fold, up from $478 million in 2014 to $2.75 billion in 2024. As a result, the city’s property tax levy has doubled, with every additional dollar going to pay rising pension costs on net.

With the massive rise over the past decade, pension costs now eat up more than 22% of the city’s net appropriations of local funds. Still, the $2.75 billion the city now spends on pension contributions annually is more than $440 million below what actuaries have determined is needed to pay down the city’s pension debt each year.

Despite repeated claims from Mayor Brandon Johnson’s administration that supplemental pension payments have been made beyond what is required of the city, the city budget continues to fail to make a full actuarially determined pension payment. This failure makes the city budget inherently unbalanced and means that every year the amount the city needs to pay to fully fund pensions will likely increase.

As a result, Chicago’s pension debt has continued to increase and now tops $36 billion across the four city-run pension systems. Collectively, these pension systems have a funded ratio of less than 24%.

These poor funding ratios show the financial distress the city continues to face. Experts warn funded ratios under 60% are unhealthy and are defined as “deeply troubled.” Funded ratios below 40% are considered past the point of no return and on the way to insolvency, major cuts or massive tax hikes.

All four of Chicago’s core pensions have already crossed the point of no return. They are the only four in the nation to be under 40% funded.

A bipartisan solution that would’ve addressed much of the problem was blocked by the courts in 2015. Since then lawmakers have been unwilling to take any action to fix pensions, which because of the court decision will require them to place constitutional pension reform to a statewide vote.

Local voters are likely to back that change: Barrington Township voters did so with 73% of the vote Nov. 5. Other communities will be asking their voters in April and a suburban mayor is calling for the amendment.

Former Mayor Rahm Emanuel and former Mayor Lori Lightfoot both called on state lawmakers to pursue constitutional pension reform at the end of their terms. Mayor Brandon Johnson and the city’s 50 aldermen now need to leverage their positions to lobby lawmakers to pursue these reforms.

Without them, the city will continue to face annual budget shortfalls, soaring property taxes, and a faltering pension system.