CITY’S PUNISHING PENSION CRISIS GROWS AGAIN — TO $31.8 BILLION, AUDIT SHOWS
Chicago’s punishing pension crisis got worse in 2019 — with unfunded liabilities rising to $31.8 billion — and that was before investment losses tied to the coronavirus pandemic.
The bad news that is certain to get worse is contained in the annual city audit otherwise known as the “Comprehensive Annual Financial Report” that shows Chicago closed the books on 2019 with an unassigned fund balance of $185 million — up from $162 million the year before.
The Chicago Firefighters Pension Fund remains in the worst financial shape, with assets to cover just 17.5% of outstanding liabilities. The police pension fund isn’t far behind at 21.4%.
Both could be bailed out by a Chicago casino. The growing fragile state of both pension funds will only intensify pressure on Mayor Lori Lightfoot to choose a casino site in or near the downtown area to maximize revenues.
The same Illinois Gaming Board study that famously said the nowrevised tax and fee structure was too “onerous” to attract an investor concluded that “only a centrally located casino that is in close proximity to high-quality hotels and other notable tourist attractions” would be able to “meaningfully penetrate the robust tourism trends” the city of Chicago enjoys.
On Thursday, the mayor reiterated that she envisions a Chicago casino as a piece of a much larger entertainment complex and said her staff has “done a lot of due diligence” by looking at “models that are successful across the country and in other parts of the world.”
“We’re also looking to see what happens with the casino industry rebounding. Las Vegas opened up in early June. Illinois casinos are just coming online. So we’re watching what’s happening in the marketplace before we take that next big formal step, which is put out [a request for proposals],” Lightfoot said.
“We want to make sure that whatever we put out is gonna be well-received by the market. We have big dreams for an entertainment complex that includes a Chicago casino. Those dreams are big — and I think rightfully so for a city of this greatness — because we know that the construction of it is gonna mean good-paying union jobs. We know that, once the complex it complete, that’s gonna be good-paying jobs for the workers that are there. And I want this to be a world-class destination for Chicago.”
During a conference call Thursday, Chief Financial Officer Jennie Huang Bennett said the city’s overall pension liability grew — from $30.1 billion in 2018 to $31.8 billion last year — even though the “stock market performance was very positive.”
“The majority of the funds saw double-digit performance to the positive. [But] overall the pension liability did increase, which is not surprising, because of the fact that, in 2019, we had not yet gotten onto an actuarially based calculation,” she said.
Bennett said the city is “very committed” to adhering to the schedule required to get the four city employee pension funds to 90% funding. Without it, some of the funds have warned of insolvency.
“The city made good on that commitment in 2020 by getting up to that actuarially determined calculation. And we are working toward that ramp up going forward. That’s been the key component of our overall financial strategy. To be able to get our pension funds toward the better place financially,” Bennett said.
Last month, Lightfoot disclosed that the stay-at-home shutdown triggered by the pandemic has blown a $700 million hole in her precariously balanced budget.
On Thursday, Bennett said the shortfall is holding steady at that number. She hasn’t seen “anything that makes it any worse.”
Her plan to fill the gap calls for: another round of budget cuts; using $100 million in higher-than-expected savings from a January refinancing; generating “additional savings” from another refinancing later this year and “looking at how we may be able to offset some of our corporate fund expenditures used for the COVID crisis” with a massive influx of federal stimulus funds.
Only then will Lightfoot turn to what she has called the last and second-last resort: raising property taxes and laying off or furloughing city employees.
The firefighters pension fund has assets to cover just 17.5% of outstanding liabilities, and the police pension fund only 21.4%, a new city audit has found.