Chicago and state politicians have ignored the city’s growing pension crisis for nearly two decades. But with the recent onslaught of credit downgrades, billion-dollar budget deficits and comparisons to Detroit, the city’s problem has become impossible to ignore. Chicago’s slide toward bankruptcy now threatens the city’s status as an economic powerhouse, as well as the...
Chicago and state politicians have ignored the city’s growing pension crisis for nearly two decades. But with the recent onslaught of credit downgrades, billion-dollar budget deficits and comparisons to Detroit, the city’s problem has become impossible to ignore.
Chicago’s slide toward bankruptcy now threatens the city’s status as an economic powerhouse, as well as the well-being of its residents and workers. Nowhere is that risk more visible than in the retirement security of its government employees.
The pension fund for policemen, for example, has just $0.25 for every dollar it needs to pay for future retirement benefits. It’s just a matter of time before the fund runs out of cash.
In fact, if the city keeps its pension contributions to the police fund at today’s level by taking more “pension holidays,” that fund will run dry by 2023.
Politicians can no longer avoid reforms. But “reforms” can’t consist of more tax hikes that serve only to preserve the same broken system.
People always complain that it’s the politicians who’ve ruined the pension systems. But most reforms on the table keep politicians in control and throw even more taxpayer money their way.
Real reform means ending political control over government worker retirements.
Political control over pensions is why the city’s firefighters, laborers, teachers, and transit, park and municipal workers all find themselves in a similar predicament as that of the city’s policemen.
In aggregate, the city of Chicago and its sister government pension funds have less than half the money required to meet their obligations.
Total pension debt across all of Chicago’s local governments, including the city of Chicago, Chicago Public Schools, the Chicago Park District and the Chicago Transit Authority, is nearly $29 billion.
Add to that the city’s other long-term liabilities and Chicago’s total debt exceeds $55 billion; more than the city can ever repay. By comparison, Detroit filed bankruptcy with just $18 billion in debt.
But the pension crisis isn’t just about the retirement security of city workers. It’s also about indiscriminate cuts to the core government services that many Chicagoans depend on. And it’s about the rising fees and taxes that are squeezing city residents.
You don’t have to look far to see the effect of skyrocketing pension costs on city services.
Chicago students now have 50 fewer schools to attend, and nearly 3,000 fewer teachers and staff to learn from as a result of a massive budget cuts driven largely by pension costs.
Residents in neighborhoods with crumbling streets and growing potholes have to wait longer for repairs. The city has 2,000 fewer municipal worker positions today than it did in 2004.
And Chicago’s effort to battle crime is even more challenging, with 1,500 fewer police officers and staff protecting neighborhoods and families compared to eight years ago.
On top of these burdens, residents will have to foot an even higher bill. Current law calls for a spike in city contributions to pensions.
In 2015, taxpayers will put it more than $3 for every $1 city employees put into the pension funds. That’s double what residents are paying now.
And without real reforms, Chicagoans will pay even more. City households are on the hook for nearly $28,000 in city-worker pension debt, more than four times the amount compared to a decade ago.
Chicago’s deepening crisis will finally force politicians to decide between two separate paths.
The first is to stay on the path to bankruptcy by propping up a broken system through more tax hikes.
The second is to fix the problem by finally getting politicians out of the retirement business.
Workers deserve to control their own retirements.
Fixing the city’s pension crisis will result in credit upgrades, balanced budgets and the preservation of Chicago’s status as a world-class city.