CITY’S PUN­ISH­ING PEN­SION CRI­SIS GROWS AGAIN — TO $31.8 BIL­LION, AU­DIT SHOWS

Chicago Sun-Times - - TOP NEWS - BY FRAN SPIELMAN, CITY HALL REPORTER fspiel­man@sun­times.com | @fspiel­man

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.

SUN-TIMES FILE PHOTO

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.

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