NYT: Chicago Faces Looming Pension Crisis

Wednesday, 07 Aug 2013 08:12 AM

By Michael Kling

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With one of the most poorly funded pension systems in the country, Chicago faces a looming pension crisis.

Its pension fund for its teachers is approaching collapse, and four other funds are short $19.5 billion, The New York Times reported.

The state of Illinois will require Chicago to contribute an additional $1 billion a year starting next year to make up shortfalls.

Editor’s Note:
Obama Donor Banned This Message (Shocking)

Mayor Rahm Emanuel told The Times the city would have to raise taxes by up to 150 percent, something he called "unacceptable."

The approaching crisis did not arise overnight. The city's pension contributions, although following a state-approved plan, have been inadequate. Plus, economic downturns lead to investment, according to The Times.

The state, which is responsible for setting the city's pension benefits and contributions levels, has failed to reach an agreement on cutting expenses.

State politicians are engrossed in wrangling that makes Washington seem polite. Gov. Pat Quinn said he would withhold legislatures' pay until they reached a solution. Lawmakers sued Quinn in response.

Some labor leaders blame the city, according to The Times. Local leaders should have foreseen the crisis and made adequate contributions, even though the state permitted the city to contribute less.

Emanuel has proposed increasing retirement ages, increasing employee pension contributions, and temporarily freezing inflation adjustments to retirees.

"The city failed to fund this all along, and now Mayor Emanuel has made it clear he is going after the hard-working men and women on the Chicago Police Department to make up for that," said Michael Shields, president of the Fraternal Order of Police, The Times reported. "He's trying to stiff us out of our pay."

While it might be the worst case, Chicago is not the only city facing pension problems.
Moody's gave Chicago a "super downgrade," cutting its rating by three levels, according to The Times.

Moody's says municipal pension costs have been underestimated, according to Fox News.

Accounting changes being implemented by Moody's and the Governmental Accounting Standards Board show the problem is worse than thought.

Already, California cities like Stockton and San Bernardino are in dire financial straits. With the accounting changes, other cities in that state, including Los Angeles, San Francisco, San Jose, Azusa and Inglewood, could join them.

Editor’s Note: Obama Donor Banned This Message (Shocking)

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