We now have a partial view of the new up-ramp on contributions Chicago taxpayers will be required to make to the city’s four pensions. (The Chicago teachers pension is a fifth, legally separate pension. It’s funded, at least theoretically, by the Chicago school district.)
Annually required contributions are set by state law. The ramp for the last two pensions was finalized by provisions in the state budget bills passed last month over Gov. Rauner’s veto. Those provisions went mostly unnoticed, though The Civic Federation published a nice summary, linked here. Legislation changing the ramp for the other two pensions became law earlier, also over Rauner’s veto.
Here’s the new ramp for all four, which was released on July 31 as part of Chicago’s 2017 Annual Financial Analysis.
The amounts are initially fixed numbers. That changes in 2020 for the police and firefighter funds (PABF and FABF) and in and in 2022 for the municipal and laborers’ funds (MEABF and LABF). Then, required contributions will be annually-calculated “ARC” amounts – the contribution the pension actuary says are enough to get the pensions to 90% funding in 40 years.
In other words, the ramp is a can-kick. It means the city will continue to fund the pensions inadequately but make it up later.
Does later ever come? When the time comes to pay up, just go back to Springfield for an extension, or take a pension holiday, or borrow to make the contribution. We saw that with the “Edgar Ramp” implemented during former Gov. Jim Edgar’s term. In the meantime, unfunded liabilities compound. Today, they total $35.8 billion for the city’s four funds. They are only 21% funded in aggregate.
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Mark Glennon is the founder of Wirepoints. Opinions expressed are his own.