Chicago’s pension funds are currently underfunded by $28 billion. Initially, Mayor Lori Lightfoot was seriously considering a new statewide fund that would consolidate City of Chicago pension money with those of other municipalities across Illinois. The plan first reported by Crain’s Chicago Business says Chicago leaders may be willing to forgo some revenue they now get from the state in exchange for relinquishing financial responsibility for the pensions.
Governor J. B. Pritzker quickly announced in a public statement, “To be clear, the state is at just above junk status in its credit rating. So, there are not liabilities that can be adopted by the state that would not drive us into junk status. So, that (i.e. city pension consolidation into a state fund) is not something that we can do.”
Mayor Lightfoot also currently supports state legislation to tax retirement income of well-off senior citizens. Taxing retirement income above $100,000 a year would net roughly $1 billion annually. Another option would be to extend sales taxes to cover such high-end services as legal advice and accounting.
“We believe it makes perfect sense for the City of Chicago’s pension funds, just like those of suburban and downstate communities, to be in one fund,” Civic Federation President Laurence Msall said.
Specifically, he said, each community would have a separate account under an existing umbrella group, the Illinois Municipal Retirement Fund. Each community would be responsible for its own current or normal costs, but legacy costs for prior unfunded liabilities “would have to be negotiated.”
The state sets pension rules and has limited how the city and other communities can deal with the funding problem. “The state needs to help manage the financial liability,” Msall said.
Without state help, analysts say Chicago will be forced to impose property taxes so large, they could cripple the economies of both the city and the state.