Illinois’ unfunded pension system has been a looming, ticking time bomb for many years. As we face the worst public health and economic crisis in generations, the longer we wait to address it, the longer it will take to recovery and right our state’s finances.
During the recent Lame Duck Session, legislators passed House Bill 2451, which would expand the annual cost-of-living adjustment for Tier 1 City of Chicago Firefighters pensions from 1.5% to 3%, while removing the 30% cap on cumulative cost of living adjustments.
If signed into law, this proposal does the exact opposite of addressing the state’s pension crisis and increases our state’s overall obligations. In the end, this would cost taxpayers between $18 million and $30 million per year in increased payments, for an estimated total of $850 million through 2055. The Chicago’s Firemen’s Annuity and Benefit Fund, which is the fund impacted by House Bill 2451, is already in the worst shape of all of Chicago’s eight pension funds. Currently, it has more than $5 billion in accrued liabilities and is only 18.4% funded.
Chicago’s total pension debt is already $45 billion and exceeds those of almost every other state in the country. Additional pension sweeteners have resulted in Illinois and Chicago having more than $200 billion in unfunded pension liabilities. This has resulted in ever-increasing property tax bills, but even with this extra revenue, pension obligations continue to grow.
Just recently, the City of Chicago’s FY21 budget included a $94 million property tax increase. If signed into law, House Bill 2451 would lead to further property tax increases, with businesses and taxpayers left to foot the bill. To add a pension sweetener at a time that property taxes in Cook County are so uncertain, because of the volatility caused by COVID and Assessor Kaegi’s property tax shift from residents to businesses, is misguided and will only further hurt businesses that have suffered so much this past year.
Even before the pandemic, Chicago businesses and taxpayers were struggling to pay these pension obligations, which has resulted in increased property tax bills. Adding new costs as we try to recover from the COVID-19 pandemic, would be disastrous. It will slow our economic recovery, stall the creation or new jobs, and worsen our already fragile fiscal state.
The Chicagoland Chamber strongly opposes this legislation and is calling on Governor Pritzker to veto this Bill. The additional costs created by the legislation are unsustainable and will cause additional financial burdens for taxpayers and the business community.
The Chicagoland Chamber of Commerce understands the challenges with our public pensions have been inherited. However, the growing costs associated with these funds have already impacted the business community negatively, and we will not see long-term economic growth and job creation without significant reform.
The Chicagoland Chamber of Commerce is committed to working with our elected officials to address this need for comprehensive pension reform.