No Hope In Sight For Chicago’s Worst-In-The-Nation Pension Plans



Back on July 18, the Equable Institute released the 2023 version of its annual State of Pensions report, which means that, yes, it’s time for another check-in on these infamously-poorly-funded pension plans. Among the wealth of tables is a list of the best and worst-funded of the 58 local pension plans studied, and, yes, you guessed it, the bottom five spots are Chicago plans, with the bottom three at levels far below all others:

  • Municipal employees, 21% funded,
  • Chicago police, 21.8% funded, and
  • Chicago fire, 18.8% funded.

Combined with the Chicago Laborers’ pension fund, with a 41% funded status, the pensions for which the city bears a direct responsibility have a total pension debt on a market value of assets basis of $35 billion. (This data is from the actual reports*, released in May, which doesn’t match the Equable report precisely.) Spot fifth-worst is taken up by the Chicago Teachers, at 42.4% funded, and the first non-Chicago system in their list, Dallas Police & Fire at 45.2%, is twice as well funded, percentage-point-wise, as the Terrible Trio.


What’s more, Ralph Martire and his Center for Tax and Budget Accountability continue to promote what he calls “reamortization” as a solution to the problem, both through an April Chicago Sun Times commentary and through the release of a report, “Understanding – and Resolving Illinois’ Pension Funding Challenges” (which is an update of a prior proposal). This proposal, which is directed at Illinois pensions but is clearly meant based on other comments to be an all-purpose fix, sounds innocuous, as merely a sort of “refinancing” as one might with a mortgage, but it’s really much more as he proposes to

  • Reduce the funded status target from 90% to 80%, based on the claim that the GAO deems this funded status to be the right target for a “healthy” plan (whether he deliberately misleads or not, he is wrong here, the National Association of State Retirement Administrators or NASRA clearly explained more than a decade ago that 100% funding is always the right target and the only significance of an 80% level is that private sector pension law requires plans funded less than 80% to take immediate corrective action rather than have a long-term funding schedule, and the American Academy of Actuaries more explicitly calls this a “myth”);
  • Issue large sums of Pension Obligation Bonds, which were questionable already when they first began promoting this but are now a terrible idea with our current high bond rates, all the more so for a low-credit-rating city such as Chicago; and
  • Move contributions from last day of the fiscal year to the first day, which he argues would be a gain of a year’s investment return while forgetting that it requires the city to have this money on Day 1 and forgo the other uses it would have.

Author(s): Elizabeth Bauer

Publication Date: 1 Aug 2023

Publication Site: Forbes

Chicago Confronts $35B Pension Crisis, Among Nation’s Worst



One of Brandon Johnson’s first moves as Chicago mayor was to buy himself time to address the city’s biggest financial problem: the more than $35 billion owed to its pension funds.

Just days after his May inauguration, Johnson persuaded state lawmakers to shelve legislation that would’ve added billions to the pension debt, while pledging to establish a working group to come up with solutions by October.

Now, the clock is ticking for the progressive Democrat to fix the worst pension crisis among major U.S. cities.

Just as Chicago reels from a spate of shootings and carjackings, inequities exacerbated by the pandemic and high-profile corporate departures, its pension gap creates a financial burden that threatens its recovery and the mayor’s agenda.

The situation makes for a cautionary tale for municipalities across the country facing long-neglected contributions and funding shortfalls. Already, the third-largest U.S. city spends roughly $1 of every $5 on pensions, while more than 80 percent of property-tax dollars go toward retirement payouts.


In 2022, for the first time, the city put in an actuarially calculated contribution for all four pensions funds – a step that helped it shed the junk rating.

Author(s): Shruti Date Singh, Bloomberg News, TNS

Publication Date: 14 July 2023

Publication Site: Governing

First We Get the Money…:$12 Billion to Fund a Just Chicago




Reinstitute the big business head tax: Mayor Johnson should reinstitute the big business head tax to make large corporations pay what they owe for benefiting from the city’s public infrastructure. The head tax existed previously in Chicago, until Mayor Rahm Emanuel eliminated it as a handout to corporations.3 Reinstating the head tax at a level of $33 per employee per year would generate $106 million a year in new revenue.4


Institute a city income tax on high earners: Mayor Johnson should lobby Springfield to give the city the authority to institute a municipal income tax on high earners who live or work in the city. A 3.5% tax on household income above $100,000 would bring in an estimated $2.1 billion a year in new revenue, of which $1.6 billion would be from high-earning Chicagoans and $490 million from high-earning commuters.16 By way of comparison, New York and Philadelphia both have municipal income taxes with top rates above 3.7%.17 By exempting the first $100,000 of income from the tax, the city could ensure the tax is progressive without a change in the state constitution.

  Institute a luxury apartment vacancy fee: Mayor Johnson should work withstate officials to implement a vacancy fee on large, luxury apartment buildings with units that sit vacant for more than 12 months at a time. Landlords who own more than 20 units and are asking for a monthly rental price that exceeds the 75th percentile in the city (based on the number of bedrooms) must pay a fee equal to the median rental price in the city on each unit that sits vacant for more than 12 consecutive months, if more than three units in the building sit vacant for more than 12 consecutive months. This would encourage luxury developers to charge more affordable rents that can maintain higher occupancy rates. This policy is designed to encourage landlords to lower rents to avoid having to pay the fee; thus, if it works as intended, we hope that it would eventually not produce any revenue for the city but that it would increase affordable housing options.

Author(s): Saqib Bhatti, Gabriela Noa Betancourt

Publication Date: May 2023

Publication Site: Scribd

Indicted Former Ald. Ed Burke to Start Collecting More Than $96K Annual City Pension, Records Show



Indicted former Ald. Ed Burke (14th Ward) will collect an annual city taxpayer-funded pension of more than $96,000, even as he awaits trial on federal corruption charges, according to records obtained by WTTW News.

Burke, 79, who did not seek a 15th term on the Chicago City Council, left office after 54 years on May 15.

When he stepped down, Burke was the longest serving member of the City Council, earning more than $120,408 annually.

Burke will start receiving pension payments of $8,027 per month in sometime in August, and they will continue for the rest of his life, according to records obtained by WTTW News from the Municipal Employees’ Annuity and Benefit Fund of Chicago.


Burke is set to stand trial on Nov. 6 on 14 counts alleging the powerful politician repeatedly — and brazenly — used his elected office to force those doing business with the city to hire his private law firm. Burke has pleaded not guilty, and used millions of dollars of stockpiled campaign cash to fund his defense.

If Burke is convicted on those charges, he could lose his pension, since his conduct occurred as part of his official duties as an alderperson.

Author(s): Heather Cherone | Jared Rutecki

Publication Date: 15 Jun 2023

Publication Site: WTTW

Car insurance prices soar in Illinois, Rep. Will Guzzardi aiming to crack down on insurers




The five biggest auto insurers in Illinois have raised automobile insurance rates a whopping $527 million since January, an analysis by two consumer groups shows.

That follows about $1.1 billion in rate increases last year by the top 10 Illinois car insurers.

The analysis by the nonprofit Illinois Public Interest Research Group and Consumer Federation of America looked at auto insurance rate increases by the five largest companies in Illinois: State Farm, Allstate, Progressive, Geico and Country Financial, which together make up 62% of the Illinois market.


Now, state Rep. Will Guzzardi, D-Chicago, has introduced legislation to address those issues and crack down on insurers. Guzzardi’s bill would:

  • Require automobile insurers to get prior state approval for rate hikes.
  • Ban “excessive” insurance increases.
  • Prohibit using gender, marital status, age, occupation, schooling, home ownership, wealth, credit scores or a customer’s past insurance company relationships in setting car insurance rates.

It’s already illegal to use race, ethnicity and religion in setting rates. That would continue under Guzzardi’s proposal.

Author(s): Stephanie Zimmermann | Chicago Sun-Times

Publication Date: 6 May 2023

Publication Site: WBEZ in Chicago





Chicago is in line for casino gaming soon, but its success is dwindling as video gaming machines and sports betting rise.

The casino industry for decades has been a significant contributor to the Illinois economy, but from 2012 to 2022 its seen a $200 million decline, according to data from the Illinois Gaming Board.

One of the reasons for the decline is the emergence of other forms of gaming which weren’t available to Illinoisans in 2012. Video gaming terminals, for example, have nearly doubled from $395 million in revenue during 2019 to $762 million in 2022.

They allow players to place bets on video poker and slot machines in local bars and restaurants, providing a more accessible and convenient experience than casinos.

Author(s): Dylan Sharkey

Publication Date: 11 April 2023

Publication Site: Illinois Policy Institute

Big City Pensions and the Urban Doom Loop



Key Findings:

  • Pension spending increased in all of the 10 largest American cities over the last decade, with a few cities experiencing a doubling or even tripling of their expenditures in 2021 dollars.
  • Almost all cities saw an increase in pension spending per employee.
  • There is large variation in the amount per employee that American cities are spending on pensions.
  • To respond to rising pension demands, some cities have reduced employment, often in the area of public safety.
  • A worsening market environment for pension funds will necessitate increased pension expenditures by cities in 2023 and beyond, exacerbating pressures to limit or reduce employment and, thus, city services.

Author(s): Daniel DiSalvoJordan McGillis

Publication Date: 6 April 2023

Publication Site: Manhattan Institute

Chicago Municipal pension fund posts net -11.7% return for 2022



Chicago Municipal Employees’ Annuity & Benefit Fund returned a net -11.7% for the fiscal year ended Dec. 31.

The $3.2 billion pension fund’s return equaled its policy benchmark return of -11.7% for the period, according to an investment report on its website.

For the three, five and 10 years ended Dec. 31, the pension fund returned an annualized net 3.5%, 4.1% and 6.5%, respectively, compared to the respective benchmarks of 3.8%, 4.8% and 6.5%.

Author(s): Rob Kozlowski

Publication Date: 8 Feb 2023

Publication Site: P&I

Municipal Employees’ Annuity and Benefit Fund of Chicago Dives into Private Debt



The Municipal Employees’ Annuity and Benefit Fund of Chicago (MEABF) has added private debt to its portfolio.

The MEABF board voted to work with three managers in the sector, allocating up to $100 million. It approved up to $40 million to both Partners Group Credit Strategy and Angelo Gordon Direct Lending Fund and up to $20 million to Brightwood Capital Fund, Stephen Wolff, MEABF’s investment officer, tells Markets Group.


Wolff said that the MEABF board approved a dedicated allocation to private debt of 4% in early 2021 and that this search fulfilled the allocation. MEABF had $3.4 billion in assets as of July 31. He said MEABF has in the past had mezzanine investments but has not had a dedicated allocation to private debt.


As of Dec. 31, MEABF had a fixed income target allocation of 25% and an actual asset allocation of 21%. Its real estate target was 10%, just above its actual asset allocation of 9%. Domestic equities are its largest segment with a 26% target and a 26% allocation. International equities were at 18%, just above its 17% target. Hedged equities, meanwhile, were at 12%, above its 10% target, while private equity was at 3%, below its 5% target.

Author(s): David G. Barry

Publication Date: 21 August 2022

Publication Site: Markets Group

Backlash Against ESG Investment Of Taxpayer Money Grows, But Illinois And Chicago Carry On – Wirepoints



But those scorned sectors have been the better investments this year, and tech companies have been hammered. Only 31% of actively managed ESG equity funds beat their benchmarks in the first half of 2022, compared to 41% of conventional funds, according to Refinitiv Lipper, as Reuters recently reported. So far this year, 19 of the 20 best-performing companies in the S&P 500 are either fossil-fuel producers or otherwise connected with fossil fuels.

Consequently, ESG funds “have been hit by unprecedented outflows in the market downturn, as investors prioritize capital preservation over goals such as tackling climate change,” wrote Reuters.

Predictably, the issue has become political since state and local officials invest trillions of dollars owned by taxpayers. Republican candidates generally oppose ESG investment of public funds, and five positions — in Kansas, Iowa, Missouri, Nevada and Wisconsin — flipped from Democratic to Republican in recent races for state auditor, controller or treasurer. Of the 50 directly elected positions, Republicans won 29 and Democrats won 19, according to a recent Roll Call report.

Illinois Treasurer Michael Frerichs, however, is among the Democratic officials not backing off on ESG. “We are in it for the long term” is the title of an open letter he recently signed along with 13 other Democratic state financial officers criticizing efforts to stop ESG use of taxpayer money. The letter is astonishingly hypocritical. It says those who want to ban ESG investment of public money are “blacklisting financial firms that don’t agree with their political views.” That, of course, is precisely what ESG does.

Author(s): Mark Glennon

Publication Date:19 Nov 2022

Publication Site: Wirepoints

Upgrade will help Chicago navigate a thornier bond market



Last week’s Fitch Ratings upgrade of Chicago offers dual benefits for Mayor Lori Lightfoot’s administration as it pursues passage of a proposed 2023 budget and preps a general obligation issue.

Fitch’s Friday upgrade to BBB from BBB-minus, the city’s first from Fitch in 12 years, and the potential for more good rating news could help sell the City Council on supplemental pension contributions and other pieces of the budget plan viewed favorably by analysts.

The Fitch action and an overall rosier view of the city’s fiscal condition should also broaden the investor appeal of an upcoming $757 million general obligation issue in a more fickle and tumultuous market than prevailed in the city’s last GO offering in late 2021.

Author(s): Yvette Shields

Publication Date: 25 Oct 2022

Publication Site: Fidelity Fixed Income

The Government Pension Reckoning Cometh



The California Public Employees’ Retirement System reported a negative 6.1% return for the year, which includes a 21.3% positive return on private equity and 24.1% return on real estate as reported through the second quarter of 2022. What will happen if real-estate prices start to fall and some leveraged private-equity buyouts go south amid rising interest rates?

Collective-bargaining agreements limit how much workers must contribute to their pensions, so taxpayers are required to make up for investment losses. Employer retirement contributions—that is, taxpayers—make up 20% of government worker compensation. That amount has soared over the past decade as pension funds tried to make up for losses during the 2008-2009 financial panic.

A recent report by the Equable Institute found that state and local pension plans now are only 77.9% funded on average, which is about the same as in 2008. But some like Chicago’s are less than 40%. Advice to taxpayers in Illinois: Run.

Author(s): WSJ Editorial Board

Publication Date: 9 Aug 2022

Publication Site: WSJ