The shakeup in Illinois’s Democratic primary may be making all the headlines, but pensions remain the biggest story in the Land of Lincoln. And Chicago has it worse than anywhere else; the situation is so dire that the New York Times is warning of a Detroit-like slide.According to Chicago’s official estimates, the total pension debt that falls on city taxpayers—a combination of the city’s pension funds and funds from the surrounding county—amounts to $63.2 billion. This is a massive burden for a city operating on an estimated $3.02 billion in revenues in 2014, and this may actually be understating the size of the problem: A Moody’s report using more accurate estimations of the rate of return found that the city’s true burden is closer to $86.9 billion. As the Illinois Policy Institute notes, this amounts to $84,000 per household; the median household income is only $47,371.Worse, S&P is piling on, changing the outlook on the state’s A-plus rated bonds from stable to negative, citing the city’s pension crisis. Reuters quotes the report:
“We could lower the rating within the next two years if the city substantially draws down its reserves in an effort to increase its pension payments in line with state mandates, regardless of whatever relief the state legislature may provide,” S&P said in a report.
Whoever wins the governorship in 2014 will have his work cut out for him.[Image of Chicago skyline courtesy of Shutterstock]