Chicago police union responds to analysis of pension fund
The Fraternal Order of Police Lodge No. 7, the Chicago Police Department union, responded to projections estimating the Policemen’s Annuity and Benefit Fund of Chicago will require a taxpayer bailout to pay for retiree benefits in four years.
Local Government Information Services (LGIS), which owns this publication, released estimations that the police pension fund will experience a major loss in funding by the beginning of 2021 because of higher wages and promises of higher pensions.
“The lodge has received many inquiries regarding the status of the pension fund in response to media claims that it is in danger of running out of money in the near future,” FOP #7 President Kevin Graham wrote in an email to members. “This is not true. Current actuarial projections prepared for the pension fund do not include a time at which the fund has depleted all assets. The media failed to mention that Illinois law mandates that the pension be funded at 90 percent by the year 2055.”
FOP No. 7 declined to comment further for this story.
Bill Bergman, director of research for the public finance watchdog group Truth in Accounting, said the statements from Graham are reckless.
"They keep us safe, theoretically, but it looks like they also threaten us down the road,” Bergman said in an email to the Chicago City Wire. “Our police are threatening us. Now.”
Graham’s statement indicates pensions will be near-fully funded in more than 35 years. However, LGIS projects the threat is more immediate.
After analyzing 12 years of police fund’s financial filings obtained from the Illinois Department of Insurance (DOI), LGIS projects at the end of 2020, the fund will have less than $150 million in assets to pay the $928 million it will owe to 14,133 retirees the next year. LGIS projections also indicated the fund's assets will fall from $3.2 billion at the end of 2015 to $1.4 billion at the end of 2018, $751 million at the end of 2019, and $143 million at the end of 2020.
According to the analysis, the Chicago police pension fund had $3.2 billion in assets in 2003. Between 2003 and 2015, it paid $3.8 billion more in benefits to retirees than it generated in investment returns.
The police fund was $8.1 billion in debt in 2015 – a number that doubled since 2003. It's not the only fund in deep. Collectively, pension funds for Chicago teachers, municipal workers and fire are $24.8 billion in debt.
Overall, the state of Illinois is experiencing a massive pension crisis which has contributed to the multiyear budget impasse in Springfield, the Illinois Policy Institute reports.
“Government workers who earn generous pension benefits have done nothing wrong. They’ve benefited from labor negotiations that have led to lucrative compensation packages. However, the state’s taxpayers can no longer afford to offer such benefits going forward,” Illinois Policy’s Ted Dabrowski and John Klingner wrote.