Chicago Loans to Pension Fund as Glitch Delays Property Taxes

In order to cover retirement checks as the city waits for property tax revenue to replenish its dwindling coffers, Chicago will lend cash to its pensions, avoiding asset sales.

The delayed collection stems from a computer issue.

The city advanced $28 million this month to the Firemen’s Annuity & Benefit Fund so it wouldn’t need to dump stocks, bonds or other assets to cover retiree benefits, according to city finance officials. City of Chicago CFO Jill Jaworski told aldermen the city is monitoring the cash needs of all four pension funds — covering firefighters, police, laborers and municipal workers — and will lend as needed until Cook County’s property tax mess is resolved, Bloomberg reported.

The issue stems from a bungled computer system overhaul at the county, which pushed back the second installment of property tax bills by weeks. Normally, about 55 percent of Chicago’s $1.77 billion levy comes in during March, with the rest arriving in August. Roughly 80 percent of that levy flows directly into pensions, meaning delays hit the funds hard.

The computer system overhaul — work that was contracted to Texas-based Tyler Technologies — has amounted to years of missed deadlines on the project, meaning property tax bills had still not been mailed out for payments that should have come due June 30. Property owners have a month to pay once those bills are received, potentially meaning actual revenue won’t fill county coffers until the end of October.

City Clerk Anna Valencia, who sits on the firefighter pension board, said that she’s glad the city acted to avoid selling off assets, but she also pressed the county to spell out how and when it will fix the billing problem.

Chicago Public Schools is also suffering from the delay, racking up penalties on late payments to its teachers’ fund. By the end of last month, that delay already piled almost $2.5 million in interest owed on the school district’s $247 million pension fund payment.

This isn’t the first time City Hall has played banker for its pensions. In late 2023, the city advanced about $425 million in similar stopgap loans, and in 2022, then-Mayor Lori Lightfoot pushed more than $500 million forward when federal aid left the budget flush. That cushion is gone now. Mayor Brandon Johnson is staring down a $1.15 billion city budget deficit, dwindling reserves and growing pension costs as federal relief money dries up.

The firefighter fund illustrates the stakes. As of year-end 2023, it carried nearly $7.5 billion in long-term liabilities but just $1.8 billion in assets, a funded ratio of 23.7 percent. That’s far below the national average of about 78 percent for large public pensions. Recent benefit hikes may push it lower still.

The city’s loans buy time for now. But with Johnson’s proposed $300 million property tax hike dead on arrival last year, and a state mandate to get pensions to 90 percent funded by 2055, the bills are only getting harder to juggle.

— Eric Weilbacher