CHICAGO Dec 13 The passage last week of reforms
to Illinois' public pension system could signal that the
legislature may soon address Chicago's pension funding problem,
Moody's Investors Service said in a report released on Friday.
But Chicago's new budget does not do enough to prepare the
city for a $590 million state-mandated increase in pension
payments in 2015, the credit rating agency added.
Illinois last week enacted long-awaited, comprehensive
changes to retirement benefits to tackle a $100 billion unfunded
pension liability. After the vote, Senate President John
Cullerton said lawmakers should now turn their attention to
addressing the pension burden on local governments.
Chicago's large and growing pension liabilities led Moody's
in July to drop the city's credit rating three notches to A3
with a negative outlook from Aa3.
"While the General Assembly's recent actions presumably
bring the state a few steps closer to addressing Chicago's
pension issues, the Chicago City Council's Nov. 26 adoption of
the 2014 budget is a negative credit development because it
continues the practice of significant pension underfunding," the
Moody's said the city's budget for the fiscal year that
begins Jan. 1 allocates $478 million for pensions, which is well
below actuarial requirements. The budget also does not build up
resources through revenue growth or spending cuts in
anticipation of the 2015 funding increase absent action by the
"If Illinois law is amended to allow Chicago to postpone the
contribution increase beyond budget year 2015, the city will
have averted a near-term budget crisis," the report said.
However, if the current course of underfunding continues,
actuaries have projected that the systems will begin to reach
insolvency as early as 2022."