Chicago’s municipal pension is one of the worst-funded pension systems in the nation despite sky-high taxes dedicated to paying into it. Fat pensions such as former Ald. Walter Burnett’s show why.
Former Ald. Walter Burnett’s retirement after 30 years on the City Council means retirement pay of $120,608. If, as expected, he gets the job as CEO of the Chicago Housing Authority, he can retire again in three years with a pension paying him $209,976, according to WTTW.
All that from one of the nation’s worst-funded public pension systems.
The Municipal Employees’ Annuity and Benefit Fund of Chicago is the pension fund for Chicago city employees. Historically, it has been the second-worst locally funded pension in the nation, ranking just above Chicago Fire and just under Chicago Police. At the end of 2024, they reported a funded ratio of 25.7% and $14.79 billion in unfunded liabilities.
Experts warn public pensions with less than 60% of what they have promised beneficiaries are deeply troubled and less than 40% are beyond the point of no return. Chicago’s city worker pension at 25.7% funding is far past the point of no return and headed for insolvency.
That isn’t because taxpayers aren’t paying their fair share. Despite Illinoisans paying the highest effective property tax rates in the nation, and Cook County seeing some of the highest tax rates nationwide driven almost exclusively by pensions, a few high-earning pensioners continue to drive up costs.
Burnett retired July 31 with a city council pension of $120,608 a year. He was paid $145,974 in his last full year as an alderman and accepted a raise for 2025 that pushed his salary to $152,016. His pension checks will grow each year with inflation.
But because he is being considered to lead the housing authority, he would collect a $310,000 salary for the next three years, boosting his pension even more. Records show just three years at the authority paying into the municipal fund at the much higher salary would boost his pension by 74% to $209,976 a year when he finally fully retires.
Burnett’s case underscores the costly and unsustainable nature of Chicago’s municipal pensions. The whole system suffers for the sake of a few at the top.
Compared to the $120,000 to $210,000 pension Burnett could receive, the average city retiree with receive $47,532 annually from the system.
Taxpayers asked to support that system see an average salary in the Chicago area of $71,600. Retirement is also a lot less generous, with the average Social Security payout at $22,344 a year.
This kind of disparity is possible because aldermen receive far more generous pension formulas than most city workers. They can collect up to 80% of their final salary after just 20 years, compared to the 30 years other employees need to reach their maximum benefit.
far less than what actuaries recommend to pay down its debt. This year’s actuarially determined contribution was $1.28 billion, but state law only requires $955.7 million, leaving a $327.5 million gap. A supplemental payment of $168.7 million still left nearly half the shortfall unfunded. Projections show the fund will not reach 50% funding until 2048, and only hit 90% by 2058.
“MEABF remains at risk of having to liquidate invested assets at inopportune times to pay monthly benefits due to the current low funding level and expected timing of employer contributions,” wrote Segal, the firm responsible for actuarial evaluations. “Further unfavorable investment performance could lead to the Fund not meeting its financial objectives.”
The market can be unpredictable and place Chicago at serious risk. In 2024, the municipal fund posted a 9.2% return on investments at fair value, above its 6.75% assumed rate, but “smoothing,” the actuarial practice that gradually recognizes market returns and losses over time, puts the return at 5.7%. That means the fund is still in the process of recognizing $47.5 million in losses.
The hard work of public servants is appreciated, especially Burnett who was one of the biggest supporters of increasing housing supply while on the council. However, overly generous pensions like his are being paid for with a funding policy that falls short year after year, adding to the burden on taxpayers and increasing the risk that the system fails those who depend on it most.
Rather than allowing a select few to exploit the system for maximum payouts, city leaders should focus on reforming benefits for sustainability. Constitutional pension reform would allow for modest limits on pensions such as Burnett’s so they don’t balloon out of control year after year.
