Chicago taxpayers’ pension contributions could spike due to recession

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A new financial report predicts that residents of the nation’s largest cities will pay more for their pensions next year as inflation and recession fears ‘wipe out’ 2021 gains. Chicago leads major cities in retirement debt.

Chicagoans are likely to pay more for their pensions in 2022 as historically poor financial returns “erase” the positive gains touted by city leaders in 2021, according to a new report from S&P Global Ratings.

“S&P Global Ratings forecasts the market to decline in 2022 and the threat of a recession will likely drive the need to increase future contributions, in most cases,” analyst Stephen Doyle wrote.

Doyle found that “widespread increases in inflation in 2022 have led to weaker economic conditions and lower market returns” for the 20 largest cities in the United States.

The S&P analyst predicts the gains these cities reported in 2021, despite receiving billions in federal pandemic aid, will be “erased in 2022.”

The report was released just days after the S&P 500 closed at its lowest level in 2022 on September 26, down more than 23% since January. Financial experts predict that the index will continue to decline before rebounding.

Doyle warned city leaders against cutting pension contributions next year to account for shrinking budgets, finding that at least a third of all pension plans will need to raise contributions to maintain their ratios current funding.

Chicago leads the cities in current retirement costs and the highest net liabilities — by far. The analyst proposed pension reform as a way to control rising costs as the economy prepares for a possible recession.

The city of Chicago’s eight public pension systems owe $46.9 billion, more pension debt than any other US city surveyed and more debt than 45 states.

Paying off that debt today would cost every household in Chicago $43,995. But that wouldn’t prevent the costs of city pensions, or the property taxes levied to pay for them, from rising again in the future.

Chicago cannot pursue pension reform until Illinois lawmakers introduce a constitutional amendment to curb future growth in government pension increases. Pensions consume a growing share of property taxes across the state, but local government pensions still owe $75 billion.

But Chicagoans have a way to control future property tax hikes, found ahead of the Nov. 8 poll. This is a proposal called Amendment 1.

Passing Amendment 1 would result in a property tax increase in Illinois, with the increase conservatively estimated at $2,149 for the typical household.

This estimate is based on the long-term average growth rate of Illinois property tax bills. But Amendment 1 would likely accelerate that growth, expanding the bargaining power of government union bosses to bargain on an almost endless array of topics, ultimately forcing residents to foot the bill for costly contractual concessions that outweigh the state law.

And it was generous contractual concessions made over the decades that created the retirement crisis in Chicago and Illinois.

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