Chicago taxpayers: piggy bank for pensions

Moody’s Investors Services recently cut the city of Chicago’s credit rating to Baa1 from A3 – citing pension debt as a key factor in the downgrade. Without real pension reform, a chain of credit downgrades will likely follow for Chicago’s sister governments. The Moody’s report noted that the recent passage of pension reforms for the...

Moody’s Investors Services recently cut the city of Chicago’s credit rating to Baa1 from A3 – citing pension debt as a key factor in the downgrade. Without real pension reform, a chain of credit downgrades will likely follow for Chicago’s sister governments.

The Moody’s report noted that the recent passage of pension reforms for the Chicago Park District, or CPD, suggests that reforms may soon be forthcoming for Chicago.

The problem is the CPD pension reform did little in the way of structurally reforming the pension system. Instead, the plan relies heavily on higher taxes and more funding.

Specifically, CPD is required to dump $75 million in new money into its pension system – an expense that falls on the taxpayers. The additional contributions include:

• $12.5 million in fiscal year 2015.

• $12.5 million in fiscal year 2016.

• $50 million contribution in fiscal year 2017.

But it doesn’t stop there. The complex formula used to determine how much the CPD contributes to its pension systems is also slated to increase. That increase will force the city, and by extension, taxpayers, to dump hundreds of millions more dollars into the pension system over the next 20 years.

The multiplier, which is currently 1.1 times the employee contribution made the two years prior, is slated to:

• Increase to 1.7 times in 2015.

• Increase to 2.3 times in fiscal year 2017.

• Increase to 2.9 times in fiscal year 2019.

What’s amazing is that this massive inflow of money is for one of the smallest pension funds in the city. CPD’s number of active participants amounts to less than 3 percent of the total number of current participants in pension plans for the city of Chicago and its sister governments.

If the CPD reforms were applied to the pension funds for the city of Chicago and its sister governments, the result would be billions more in higher taxes and fees for pensions.

And that’s the problem with the CDP pension reform bill. It assumes taxpayers are willing to stick around in a city with higher taxes and reduced levels of services.

But the sky-high taxes are already forcing Chicago residents out of the city. Chicago had more residents in 1920 than it does today. Just between 2000 and 2010, Chicago lost 200,000 people.

If the city of Chicago uses the CPD pension plan as a model for reform, not only will pension payments continue to eat up resources for core government services, but taxpayers will also continue to flee the city.