We have a big problem in Chicago. The city’s public safety pension funds have an obligation to pay $68 billion in pension benefits to police and firemen over the next 30 years. To meet those future obligations, the funds need $26 billion in investments right now.
But the funds have just $6 billion in assets today. Absent a bailout, the pension funds will never have enough money to meet their obligations.
And yet – unbelievably – Illinois lawmakers have passed a new bill to make things worse. They’ve increased the obligations of those pension funds by sweetening the benefits of police and firefighters hired after 2010 – so-called Tier 2 workers. If Gov. J.B. Pritzker signs the bill, that $68 billion obligation will jump by several billion, to something over $70 billion.
But assets on hand? Still $6 billion. Meaning the funds will be even more broke.
Illinois lawmakers may think they’re supporting public safety workers by increasing their benefits, but they’re not. Their actions are harmful. The bill only makes it more likely that public safety pension checks will get sliced in the future.
Today, the police and fire pension funds already have a dismal funded ratio of just 25%. But if the bill becomes law, the funding ratio will fall to an even worse 18%, according to the city’s actuaries.
And that 18% is based on rosy projections that the pension funds will consistently get investment returns of 6.75%.
A more realistic assumption is that the funds will be forced to invest more prudently given how little money they have. And that means the funded ratio of the plans is more likely in the low teens.
It’s hard to believe that lawmakers would pass something this destructive for our public safety workers. And that Pritzker would sign it into law.
We’re huge supporters of our public safety workers and the work they do to protect us. Their retirement security shouldn’t played around with like this.
