The Windy City may be closer to bankruptcy than New York. Fitch Ratings recently downgraded the city three notches because of pension liabilities for its 30,000 retired workers and a struggling economy.
Makes perfect sense when you consider that Chicago’s four pension systems—for police, firefighters, laborers and municipal workers—were short by $19.5 billion at the end of 2012. That does not include the ailing pension fund for Chicago teachers, which had its own $8 billion shortfall at the end of the last fiscal year.
The option to raise property taxes to cover the annual required pension contribution is simply out of the question considering homeowners would be looking at a 35% tax increase.
Next year, Chicago must come up with a state-mandated $590 million increase in its contribution to police and fire pension funds, so it’s going to get worse before it gets better.