Chicago’s finances were already on life support. Now, with a single piece of legislation, the state of Illinois has pushed the city closer to fiscal collapse—and put every American taxpayer at risk of footing the bill.
On August 1, Governor J. B. Pritzker signed a bill that ranks among the most financially reckless in Illinois history. It includes pension “sweeteners” for Chicago police and fire employees hired after 2011. Experts estimate that it creates $11 billion in new liabilities and drops the “funded ratio” of Chicago police and fire pensions to just 18 percent, meaning that they have just 18 cents on hand for every dollar owed. (Actuaries consider funded ratios below 40 percent as being at the point of no return.)
No American city has a worse public pension problem than Chicago. It carries more pension debt than 43 U.S. states and is home to seven of the ten worst-funded local pension systems in the nation. As a result, no other big city burns a larger chunk of its budget (around 40 percent) on debt and pensions every year.
And no U.S. city has a worse credit rating. The new pension sweeteners will more than likely contribute to another credit downgrade for Chicago, dropping the city into junk status and imperiling its ability to invest in schools, safety, and infrastructure.
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