Understanding and Addressing Chicago’s Pension Funding Crisis


May 2, 2024

The City of Chicago is responsible for funding the following four, defined benefit public pension plans: Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund (“LABF”), Municipal Employee’s Annuity and Benefit Fund (“MEABF”), Policemen’s Annuity and Benefit Fund (“PABF”), and Firemen’s Annuity and Benefit Fund (“FABF”).

These four systems have the lowest funded ratios for local pension plans in the country. Considered together, in 2022 Chicago’s four systems had $44.7 billion in liabilities, but only $10.8 billion in assets to cover those liabilities. This means Chicago, and hence its taxpayers, face a significant, $33.9 billion, aggregate unfunded liability. This is effectively debt owed to the city’s pension systems. Frequently, the financial health of a pension system at any point in time is based on its “funded ratio”—which is simply the percentage obtained by dividing a pension system’s assets by its liabilities. Typically, pension systems are deemed to be financially healthy if their funded ratio is above 80%, but the goal is always to get systems 100% funded.  The aggregate funded ratio across all four Chicago pension systems of just 24 percent is decidedly not healthy under any metric.

CTBA's new report, "Understanding and Addressing Chicago's Pension Funding Crisis" details the true causes of Chicago’s pension funding problems, how state law made matters worse, recent attempts to address Chicago’s pension funding crisis, and presents CTBA’s proposal for responsibly re-amortizing the pension debt to generate roughly $11 billion in savings.

Topics:Pensions, Public Pensions

Tags:Chicago Budget, Chicago Pensions, City Employee Pensions