Blue state governance strikes again. Taxpayers face up potential bump of 50% to cover unfunded pensions.
Live in Chicago? A report by Nuveen Investments shows a pension payment spike looms in 2016, and describes the potential tax hike needed to fix it as “staggering.”
Titled “Chicago’s Fiscal Stress: New Term, Same Problems,” the report gives a chilling overview of the issue at hand:
“Years of poor funding exacerbated Chicago’s pension obligations so that it may be infeasible to keep them solvent without modifying benefits. Chicago’s four pension plans have a combined $20.1 billion unfunded liability and funded ratios ranging from just 24% to 57%.
“A state law enacted in 2010 requires Chicago to begin making actuarially-based annual contributions to its policemen’s and firemen’s pension funds in 2016, resulting in a payment increase of approximately $540 million. Due to the lag between when taxes are levied and collected, paying the required pension payments in 2016 would mean any property tax would have to be levied in 2015. However, the administration was reluctant to pass a budget with higher property taxes prior to the mayoral election. Based on state law and recent actuarial valuations, Chicago is required to contribute $839 million to its policemen’s and firemen’s pensions in 2016 (levy year 2015). But the city has only budgeted for a pension levy of $290.4 million.
“We note that the state law requiring full funding of annual pension payments beginning in 2016 applies not only to Chicago but to a number of overlapping taxing districts such as Chicago Public Schools, Cook County and a handful of other governmental entities. Without reforms, fully funding pension contributions for Chicago and its overlying taxing districts would require substantial revenue increases and/or expenditure cuts.