Chicago residents are on the hook for over $86 billion dollars. That’s $83,000 dollars per household. To put these already egregious numbers into perspective, the average Chicago family only makes $66,000 dollars annually, before taxes. Chicago’s financial squeeze is preventing the city from providing basic services, and taxpayers are leaving in droves. Since the 2000 census, over 200,000 people and counting have fled Chicago.
Decades of pension mismanagement is largely to blame, responsible for two-thirds of the city’s debt. The city is struggling to make good on promises to fund workers’ retirements, resulting in runaway borrowing. Chicago is at the mercy of lawmakers in Springfield who are still hashing out pension reform that began this summer. Statewide, Illinois bears a $100 billion dollar unfunded pension liability, costing the state 22 percent of their general revenue to fund pension costs and debt.
SB 1, a plan sponsored by the Senate President and House Speaker has gained the most momentum in addressing the looming pension crisis. The legislation would cap pensionable salaries, increase employee contributions, and require employees to elect whether to accept reductions in annual increases or forgo certain healthcare benefits.
This plan sounds good in theory. But in practice, it just perpetuates the pension crisis, only reducing the state’s unfunded liabilities to already unsustainable 2011 levels. Maintaining a defined benefit plan is dangerous to everyone. Employees’ retirements remain subject to the dealings of politicians, and the taxpayers will continue to foot the bill for the broken system. Pension debt will continue to prioritize budgets, diverting evermore funding away from education and public safety.
Thankfully, there is an alternative to SB 1. HB 3303 provides the best solution for the pension crisis, eliminating the state’s unfunded liabilities by 2045. Replacing pensions with 401(k)-style retirement plans will turn over retirement responsibility to individuals while protecting the benefits they have already earned. Employees won’t have to worry if they’ll ever see their retirement, and taxpayers won’t be funding endless government borrowing. Real pension reform will eliminate retirement uncertainty and allow for economic growth and tax cuts. It’s time for Chicago to once again be an economic engine of America, not the next Detroit.