CHICAGO — It’s not the vision of a world class city that Chicago Mayor Rahm Emanuel typically likes to portray.
More teachers losing their jobs, thousands fewer police and firefighters on duty, less frequent trash collection and miles of potholed roads going unrepaired — all as property taxes soar.
But that’s the scenario Emanuel and others have said could befall the nation’s third-largest city if the state Legislature — which passed a landmark measure last week to address Illinois’ severe public pension shortfall — doesn’t deal with Chicago’s own multibillion-dollar pension problem.
The economic capital of Illinois and the Midwest, Chicago holds the dubious distinction of having the worst-funded public pension system of any major U.S. city.
It’s a crisis that’s putting in peril Chicago’s reputation as “the city that works,” and its vision of being a modern transportation hub in the midst of a high-tech boom.
“Chicago sticks out for all the wrong reasons,” said Rachel Barkley, a municipal credit analyst at Morningstar Inc., referring to a public pension system that is only 35 percent funded, compared to New York’s 60 percent and San Francisco’s 88 per cent.
It’s raising the question: which version of itself will Chicago become?
Just raising taxes, which could cause businesses to leave, or cutting services, which would penalize residents, won’t be enough, said Michael Pagano, dean of the College of Urban Planning and Public Affairs at the University of Illinois at Chicago.
“I don’t think either one is even a possibility,” he said. “Everybody’s going to have to give something.”
Chicago’s pension funds for city workers, police officers and firefighters are about $19.5 billion short of what’s needed to meet its current obligations.
The shortfall amounts to about $7,100 per Chicago resident. That’s nearly eight times the per person cost of the unfunded pension liability in Detroit, a city that saw its population plummet in the years before it went into bankruptcy earlier this year. Add in the unfunded liability for Chicago teacher pensions, and the total shortfall jumps to about $27 billion.