Chicago needs $1B more annually to cover pensions
One expert said Chicago taxpayers would need to shell out $1 billion more every year to improve the city’s credit rating.
Moody’s Investors Service Director Naomi Richman told a crowd at the City Club of Chicago that while the city recently moved to become more responsible with its pension debt, it still has a long way to go.
“How much would it cost per year for Chicago to pay enough into pensions that (the total debt) would get smaller next year? The answer is $1 billion.”
Richman said it would require half of Chicago’s annual budget to fully contribute to its pensions.
If the city can’t meet that minimum, the gap will keep getting wider. Richman said the city would need to significantly raise taxes beyond the record property tax increases from earlier this year. “If you think of the $544 million tax hike, you would need another two of those.”
Richman said that’s money that would otherwise be going to services. “You have a crowding-out effect where more and more of the budget is going toward these fixed costs, and less is left for other essential kinds of government services.”
Nationally, Chicago stands alone in the level of unfunded pension liability, Richman said. “Chicago has the highest unfunded pensions, and by a lot, of virtually all 8,500 local governments that Moody’s rates across the United States.”
Chicago is expected to contribute $2.4 billion into the city’s pension funds in 2017. The city’s pension debt is more than nine times its annual operating revenue.
Richman said Chicago, unlike bankrupt Detroit and Puerto Rico, still has a strong economy and that city officials may be willing to make the unpopular decisions regarding pension debt.
–Illinois News Network