CHICAGO May 21 The funding gap for 10 Chicago-area public pension systems widened by 16.7 percent to $32 billion in fiscal 2011 from fiscal 2010, heightening the risk of tax increases or service cuts for residents, a report by a civic watchdog group said on Tuesday.
The Chicago-based Civic Federation also found that pension funding levels continued to drop, falling to an average actuarial level of 50.8 percent in fiscal 2011 from 80.3 percent in fiscal 2002. That suggests the area's pension systems currently have sufficient resources to meet just over half of their future financial obligations to retirees.
A funding level of 80 percent is considered healthy.
Audited data for fiscal 2011 was the most recent available for all 10 funds, according to the Civic Federation.
"Without comprehensive reforms, this staggering level of pension obligations will soon mean dramatic tax increases, significant service cuts or both for Chicago residents," said Civic Federation President Laurence Msall in a statement.
The report, which comes as Illinois lawmakers struggle to find a fix for the state's massively underfunded pension system, looked at the city of Chicago's four pension funds, as well as retirement funds for Cook County, Chicago Public School teachers, the Chicago Park District, the Chicago Transit Authority and the Metropolitan Water Reclamation District. The report is available at:
Chicago's four funds accounted for $16.7 billion of the unfunded liability or $6,174 per capita, according to the report.
The report pegged the funds' financial decline to inadequate contributions by the local governments over a sustained period and to recent investment losses. It added that required funding levels will be harder to achieve in the future because the retirement systems will have fewer active employees to support a growing number of retirees. In fact, six of the 10 funds had more retirees than workers in fiscal 2011.
Chicago's Civic Federation urged area governments to join forces to get pension reforms, such as higher retirement ages and reduced annual benefit increases, through the Illinois General Assembly.
"Local governments must also pursue increased contributions from workers and changes to how governments fund their share of benefits, linking them to an actuarially sound methodology based on funding levels," the report said.
Chicago Mayor Rahm Emanuel warned last fall that pension payments are on track to consume 22 percent of the city budget within four years. Meanwhile, the Chicago Public Schools' $196 million fiscal 2013 pension payment is expected to nearly triple in fiscal 2014.
Chicago is hardly alone. Nationally, the pension funding gap among the biggest cities in each state or with populations above 500,000 stood at $99 billion, and 37 of the 61 cities surveyed had funding levels below the key 80 percent threshold, according to a study earlier this year from the Pew Center on the States. The study looked at data from fiscal 2009, the most current year for which figures were available for the cities.
Illinois lawmakers have been struggling to pass reforms aimed at the state's nearly $100 billion unfunded pension liability. The Democrat-controlled House and Senate have each passed legislation that incorporates different reform approaches and time is running out for an agreed-upon bill by the May 31 adjournment of the spring session.