Chicago has more public pension debt than 43 states

Chicago’s pension systems for city workers have $51 billion in debt, so much that they are in worse shape than 43 states. Fixing them requires Chicago’s mayor to push for a change in the Illinois Constitution.

Chicago’s pension systems remain among the worst-funded local retirement systems in the nation, with municipal, laborers, police, fire and teachers pension funds holding more debt than 43 states.

According to data provided by the Equable Institute, the four city-sponsored pension systems – municipal, laborers, police and fire – along with the teachers pension fund carry pension debt of about $51 billion. Despite billions in extra funding from federal pandemic relief, the unfunded liability of these pension has only gotten worse.

The $51 billion figure for the city’s core pension systems represents the retirement funds that are most directly paid for by Chicagoans, primarily through property taxes. More than 80% of Chicago’s property tax levy – including all of the automatic annual increase – goes to pensions, and the Chicago Teachers’ Pension Fund has its own property tax levy specifically dedicated to pensions. With unfunded liabilities only growing each year despite Chicago levying some of the highest property taxes in the nation among large cities, only a constitutional amendment to allow pension reform can help the city turn around its finances.

In additions to the core systems, several other Chicago area pension systems also have significant shortfalls. This includes the Chicago Transit Authority pension, which is only 54.8% funded, and the Chicago Metropolitan Water Reclamation District fund, which is 51.9% funded. Seven of the Chicago area’s pension funds were among the top 10 worst funded in the country. All four of Chicago’s core systems ranked at the bottom of funding ratios.

These figures come from fiscal year 2023, the most recent year for which comparable data is available. Chicago’s funding ratios are far below what they were just a year ago because of ever-increasing costs.

These poor funding ratios show the financial distress the city continues to face. Experts warn that funded rates under 60% are unhealthy and are defined as “deeply troubled.” Funded ratios that are below 40% are considered to be past the point of no return and on the way to insolvency or major cuts. Using those standards, all four of Chicago’s core pensions have already crossed the threshold of being beyond 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 constitutional pension reform.

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 now needs to leverage his position to lobby lawmakers to pursue these reforms.