Mayor Johnson aims to tackle a problem that vexed his predecessors: Woefully underfunded pensions

Chicago Mayor Brandon Johnson has created a task force to look for solutions to Chicago’s underfunded pensions, asking the group to address one of the city’s deepest and most intractable financial problems.

Johnson announced the working group’s formation late Friday but did not specify who would serve it except that it would include “state legislators, the city’s Budget Director, the city’s Chief Financial Officer, and representatives from the city’s various labor unions, including both the police and fire unions.”

“As Mayor of Chicago, I am committed to protecting both the retirement security of working people, as well as the financial stability of our government so we can achieve our goal of investing in people and strengthening communities in every corner of the city,” Johnson said in a statement. “Together, with our state legislative partners in Springfield, I am establishing a working group to collaborate on finding a sustainable path forward to addressing existing gaps in the city’s four municipal pension systems (Firefighters, Police, Municipal, and Laborers).”

Local Fraternal Order of Police President John Catanzara, meanwhile, released a video in which he said he’s working with City Hall on broader solutions. The clip was seen as a positive sign due to the otherwise contentious relationship Catanzara has with City Hall and his claim that swaths of the police force would quit if Johnson were elected.

Creating a task force will be the easy part, however, as finding money to boost the city’s pensions has bedeviled Johnson’s predecessors. Former Mayor Rahm Emanuel, for instance, pushed plans that were ruled unconstitutional by the Illinois Supreme Court.

Former Mayor Lori Lightfoot secured a Chicago casino from Illinois lawmakers but was unsuccessful in convincing state officials to take over the city’s pensions, a move she floated early in her administration.

Ballooning police and fire pensions have long been a political headache for Chicago mayors. Lightfoot failed to stop Gov. J.B. Pritzker from signing a measure in 2021 surrounding the fund structure for firefighters.

Now it’s Johnson’s turn to seek solutions to a politically fraught problem with few clear legal remedies.

As of the end of 2021, Chicago’s pension system for sworn police officers was only 24% funded, with unfunded liabilities totaling more than $11.8 billion. Firefighter pensions were 20.9% funded with $5.6 billion in unfunded liabilities.

Lawmakers have long struggled with how to rein in Chicago’s retirement benefits, which they can only do for future employees because the state constitution does not allow for existing workers’ pensions to be cut. Some say that changes from just over a decade ago went too far, however, and denied municipal employees a pension funded at the federally required levels.

Lightfoot had argued the 2021 state bill would increase firefighter pension costs and could lead to property tax hikes, but supporters, including sponsor Democratic state Sen. Robert Martwick, said it puts Chicago firefighter pensions on par with suburban and downstate systems.

The legislation did away with a pension law that stipulates a Chicago firefighter born on or after Jan. 1, 1966, will receive a non-compounding annual 1.5% cost-of-living adjustment to his or her pension, with a lifetime limit of 30%. Firefighters born before that date had gotten a 3% annual increase.

The new law removes the Chicago pension differences based on date of birth and eliminates the 30% cap on cumulative cost-of-living adjustments. The system now more closely resembles counterparts outside the city, where firefighters hired before 2011 receive annual 3% compounding increases to their pensions and those hired in the past decade receive a less generous increase.

Part of the reasoning was that the city has historically shirked paying the smaller increases to the younger firefighters and instead came to the legislature every few years to push the cutoff birthdate forward. But the city continued to base its contributions on the lesser amount, leading to a perpetual underfunding of the pension system.

Still, Lightfoot warned that the change would double pension costs by $18 million to $30 million each year. She argued that a similar bill introduced by Martwick related to police pensions would spike Chicago’s annual costs by $57 million to $96 million a year.

That bill, which has languished in the Senate, removes an age restriction — 55 years and up — for an officer to receive an automatic 3% annual increase to their pension that is not subject to the 30% cap.

On the policing side, the city pays into two funds: one for sworn CPD officers; the other civilian employees. Payments to the Policemen’s Annuity and Benefit Fund of Chicago totaled $5.3 billion between 2012 and 2022, according to city budget documents, while that number was more than $330 million for the Municipal Employees’ Annuity and Benefit Fund.

In 2022, pension payments totaled $832 million for sworn officers and $64 million for civilian employees of Chicago police. Along with $175 million in annual benefits, estimated Police Department costs within “finance general” top $1 billion.

Johnson has not stated his position on Martwick’s pending bill on the police pension structure. His deputy chief of staff, former state Sen. Cristina Pacione-Zayas, voted yes for Martwick’s firefighters pension legislation in 2021.

Meanwhile, the plan to bring in a casino to Chicago, negotiated under Lightfoot, is expected to bring a fresh revenue stream for police and fire pensions. The latest projections for the project spearheaded by casino chain operator Bally’s show between $56 million to $70 million raised in the next three years after a temporary casino opens at the Medinah Temple in River North. Starting in 2026, revenues are slated to jump to $170 million as the permanent site at the current Chicago Tribune Freedom Center printing press opens, until hitting $246 million in 2028.