Taxpayer advocates push fixes for Chicago’s massive pension debt
At a press conference, a new alliance said failure to address Chicago’s pension problems will threaten public services, fail retirees and push taxes higher so more people are encouraged to leave Illinois.
Advocacy groups Wednesday appealed to Chicago Mayor Brandon Johnson to follow recommendations that will put expert advice and taxpayers’ concerns into efforts to fix the city’s public pension crisis.
The newly formed Taxpayer Pension Alliance, which includes the Illinois Policy Institute, held a joint press conference at City Hall to announce a series of recommendations to the mayor’s Pension Working Group. They are intended to protect taxpayers and ensure the massive pension debt is not ignored.
Chicago pensions have a funding ratio of only 32%, one of the worst among the nation’s major cities, according to data shared at the press conference. Every household in Chicago would need to pay $45,000 to cover the city’s pension liability.
“In his first budget, Mayor Brandon Johnson recognized this as a big issue by adding $307 million to the city’s pension fund. The bad news is projected pension payments for 2024 came in $335 million higher than originally estimated,” said Illinois Policy Institute Head of Policy Josh Bandoch.
The formation of the city’s Pension Working Group is another sign Johnson is taking the issue seriously. The mayor said he wants to address the problem without raising the city’s already high property taxes – a commitment the Taxpayer Pension Alliance supports.
But the group also warns real relief will depend on what solutions Johnson’s working group proposes. Specifically, they warned against amortization bonds, which would just push pension liabilities farther into the future.
Here’s what the Taxpayer Pension Alliance recommends:
- A requirement to have any proposal scored by independent, professional actuaries.
- A requirement to reach and maintain 100% funding for all plans within 20 years.
- A requirement to reduce the burden on the next generation of taxpayers by adopting a level-dollar amortization schedule.
- A moratorium on any benefit increases until plans are 100% funded.
- A requirement to enroll participants in Social Security if Tier II plan provisions are found to be in violation of the Employee Retirement Income Security Act.
- A ballot initiative to amend the Illinois Constitution and replace the current pension clause, giving the Illinois General Assembly the power to improve the retirement security of public sector workers while reducing the pension burden on taxpayers.
Pension debt is a problem for taxpayers because it eats up budget space that could otherwise be used for public services. The risk to public services is inequitable and especially difficult for the disadvantaged, Bandoch said.
One of the reasons Illinois’ debt is so high is because of legal loopholes that allow beneficiaries to take out far more than they contribute. However large-scale changes that could address those loopholes may be impossible under current Illinois law, which is one of the reasons the group proposes a ballot initiative.