Independent analyst confirms doomed fate of Chicago Police pension
Mike “Mish” Shedlock, a senior fellow at the Illinois Policy Institute and financial adviser at Washington state-based Sitka Pacific Capital Management, has independently confirmed that Chicago’s police pension is poised to be broke before 2021.
In a post on his personal blog, MishTalk.com, Shedlock said the projections made by Local Government Information Services (LGIS), which owns Chicago City Wire and this publication, on the state of the Policemen’s Annuity and Benefit Fund of Chicago were accurate.
“As long as we are going to have this idea, here, that states or cities need to look at what’s working, what’s not working – Illinois is the most-broken state in the country,” Shedlock told the Wire. “It really is quite incredible. Here’s what I think needs to be done in five desperately needed reforms: municipal bankruptcy, pension reform, right-to-work legislation, end of prevailing wage laws and workers’ compensation reform.”
Shedlock said a big part of the problem in Illinois is the number of municipal governments not having the funds to operate. His recommendation is that these municipalities need to look at filing for governmental bankruptcy protection.
“There are a whole number of cities that absolutely need bankruptcy reform,” he said. “That is the only way for some of these cities to escape their pension obligations.”
On June 20, LGIS released projections that contend that by the end of 2020, the police pension will have minimal funds for multibillion-dollar liabilities owed to more than 14,000 retirees.
LGIS analyzed 12 years of the police fund’s financial filings obtained from the Illinois Department of Insurance (DOI). From that, LGIS projects that 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 also estimated that 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.
The Fraternal Order of Police (FOP) Lodge No. 7, the Chicago Police Department's union, has criticized the analysis. FOP No. 7 President Kevin Graham claimed the projections are inaccurate.
“Current actuarial projections prepared for the pension fund do not include a time at which the fund has depleted all assets,” he said in an email to members of FOP No. 7.