COGFA Reports on Impact of Local Government Pensions

The Illinois Municipal Retirement Fund, the City of Chicago pension funds, and the Cook County pension funds are major obligations of the taxpayers of Illinois. The Commission on Government Forecasting and Accountability (COGFA), the General Assembly’s budget-watchdog arm, issued a report this week on these funds and their liabilities. Together with a separate family of funds (not covered in this report) that underwrite pensions for Illinois’ Downstate police officers and firefighters, these funds constitute the non-State-managed side of the overall unfunded pension liability of Illinois.

Defined-benefit pension systems have been challenged in the 2010s by very low worldwide interest rates on prudent, pension-fund-worthy interest-bearing investments. Many segments of the private sector have responded to these global economic conditions by phasing out defined-benefit pensions and encouraging their employees to invest in defined-contribution mutual funds with an emphasis on equity capital. Illinois’ local governments, by contrast, are constrained by the terms of statutory law and the state Constitution in what they can do with respect to pension obligations owed to current employees and vested members of their pension funds.

The unfunded liabilities of the eight Chicago-based pension funds covered in this February 2018 report is $41.8 billion. The comparable figure for Cook County is $6.9 billion and the comparable figure for the Illinois Municipal Retirement Fund (non-Chicago, non-Cook County, non-police, and non-firefighting public employees in suburban and Downstate Illinois) is $3.0 billion.

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