Chicago Pensions on the Brink
Some city funds can be considered ‘technically insolvent.’
By The Editorial Board
Chicago Mayor Brandon Johnson Photo: jim vondruska/ReutersChicago’s fiscal mess is infamous but now its pension funds teeter on the brink of insolvency.
Last week Mayor Brandon Johnson had to dip into the city’s cash reserves to cover retirement checks that a city pension fund couldn’t pay.
The crisis was created by a temporary computer-caused delay in the collection of property taxes that left the Firemen’s Annuity & Benefit Fund of Chicago without enough cash to cover current retirement checks.
Mr. Johnson stepped in with $28 million in short-term loans to save the fund from having to sell assets to cover the shortfall.
Chicago has been carrying on as though no reckoning would ever arrive for its chronically underfunded pensions, but is everyone awake now?
Chicago’s four public pension funds are among the nation’s most underfunded, with more pension debt than 44 states, according to the Illinois Policy Institute.
The city carries more than $35 billion in pension debt and a credit rating barely above junk status.
In July that didn’t stop Springfield from throwing gas on the fire for public unions.
Against the advice of budget watchers, Democrats passed a bill to increase pension payments for Chicago police and firefighters that added billions of dollars to pension liabilities and tanked their funding ratios.
They knew what they were doing.
In a memo emailed to Deputy Governor for Budget and Economy Andy Manar in July, Chicago chief financial officer Jill Jaworski explained that the proposed changes in the pension benefits would reduce the funded ratio for both the police and firefighter funds to under 20%.
“Many actuaries consider a funded ration under 20% to be technically insolvent,” she wrote.
Ms. Jaworski said city contributions to the funds would increase by an estimated $60 million in the first year and add $6.6 billion to city contributions over 30 years.
And while the bill was supposedly designed to bring city safety workers into parity with their downstate peers, the city workers aren’t required to pay the same share of their payroll toward pensions.
The bill “makes no provision for funding the enhanced benefits,” she wrote.
Gov. JB Pritzker signed it anyway.
Asked about the trouble it would cause the city, he said Brandon Johnson “never once called me or, as far as I know, any legislators, to oppose that bill or ask for any changes in that bill.”
Has Mr. Pritzker spoken to his deputy Governor?
Mayor Johnson’s strategy for dealing with the city’s debt has been to take out more debt to cover it, or raise property taxes.
Most recently, the mayor’s attempt to pressure the Chicago Public Schools to take out a short-term high-interest loan to cover a pension payment was rejected by a school board led by Mr. Johnson’s own appointees.
Mr. Johnson recently ruled out a property-tax increase, but the money has to come from somewhere.
Chicago has a $1.15 billion budget shortfall in addition to pension debt.
Mr. Johnson’s budget task force has proposed everything from taxes on bottled water and plastic bags to canceling the city’s mounted police unit.
This is what happens when public unions essentially run city and state government.
While Messrs. Johnson and Pritzker campaign against President Trump, their fiscal houses are burning down.
0 comments:
Publicar un comentario