How We Got Here

It is important to explain how the pension system got into so much trouble to understand the size of the problem we need to come together and fix.

It is true that a series of unforeseeable and severe economic events occurred over the course of the past two decades, but the pension system’s funding mechanisms were broken from the very beginning.

Most of the retirement systems covering Chicago’s employees depend on payroll-based contributions and investment earnings to fund benefit payments. The funding mechanisms do not automatically adjust to increase contributions to make up for investment losses.

So, the pensions started to get into trouble when large and uncontrollable economic events occurred that lead to significant investment losses, but had the system been established differently, our pension funds would have been able to withstand the economic stresses.

Further, our leaders made promises on pension funding that were not supported by math. They tried to insulate employees and taxpayers from the real consequences. As the City and other government budgets got squeezed, leaders tried short-term solutions to get through the crisis, hoping economic recovery would absorb the impact.

When you combine a broken system, with the failure of our leaders to act appropriately and honestly on top of the market collapses and pension sweeteners, you get to the crisis we are in today.

For more information on these contributing factors, click here.