Chicago delaying pension payment, running low on cash
Chicago is splitting its 2026 “advance” pension payment, blaming delayed Cook County property taxes but raising concerns about pension stability.
Since 2023, Chicago has made an “advance” payment in January to its woefully underfunded pensions, but the city doesn’t have the cash this year so Mayor Brandon Johnson is splitting it.
He’s blaming delayed property tax revenue distributions by Cook County, but the move shows just how shaky the city’s pension finances are.
The city budget includes $2.9 billion in pension payments. Of that total, nearly $260 million is for “advance” supplemental pension payments for the four retirement systems paid from the city budget. Even with that extra payment above what is legally required by the state, the total still pales in comparison to the $3.3 billion actuaries have said would be needed this year to start effectively paying down the debt.
In 2024, the unfunded debt from Chicago’s major pension funds surpassed the debt of 44 states. Data from the Equable Institute shows Chicago’s municipal, laborers, police, fire and teachers’ pension systems together carry about $53 billion in unfunded liabilities. Seven Chicago-area pension funds also rank among the 10 worst-funded local pension plans in the nation, but three of those are paid by other taxing bodies.
This isn’t the first time in recent months Chicago has struggled to pay for its pension obligations. Johnson had to tap city cash reserves to cover a $28 million payment to Chicago’s fire pensioners so the fund could avoid emergency asset sales in September.
That came shortly after Gov. J.B. Pritzker signed into law a police and fire pension sweetener that added roughly $11 billion in new liabilities. It also dropped the funding ratios for Chicago’s police and fire pension systems so low Johnson’s office described them as “technically insolvent.”
City leaders said Chicago will pay roughly half in mid-January and send the remainder of the $260 million later in the year. Their explanation for the split payment was delayed revenue.
Cook County property taxes were sent out months late, delaying when taxing bodies are receiving the revenues. More than 80% of Chicago’s property tax levy goes to pensions and almost the entire increase since 2014 has been consumed by the cost of keeping up with rising benefits.
Chicago residents pay among the highest effective residential property tax rates in the nation, and Chicago commercial property taxes are twice the average of other U.S. cities. But when those revenues are delayed, the city’s cash position exposes how fragile its financial systems really are.
By splitting its “advance” pension payment, Chicago is inadvertently telling credit rating agencies, residents and city workers that its ability to manage pension obligations is becoming less certain. That points toward looming pension insolvency and a tipping point for Chicago city finances.