Despite a 2021 law meant to improve the funding ratio of Chicago’s park pension, the amount of money the system has on hand to pay out benefits remains low.
Chicago’s park workers’ pension fund ended 2024 with only about 33 cents on hand for every dollar it owes, highlighting how “fixes” will be slow to restore financial security.
The Park Employees’ and Retirement Board Employees’ Annuity and Benefit Fund reported an actuarial accrued liability of $1.31 billion as of Dec. 31, 2024. Of that, $872 million remains unfunded, leaving the system just 33.25% funded.
In plain terms, for every dollar owed, the fund has only about 33 cents on hand. That’s a slight decrease from the previous year’s funding ratio of 33.34%. Pension experts say anything below 40% funding is likely beyond hope.
While an improvement from its 28.74% low in 2020, the system is down more than 10 percentage points from where it stood a decade ago. In 2020, the fund was projected to reach insolvency by 2028. Luckily those projections inspired action.
In 2021, Gov. J.B. Pritzker signed Public Act 102-0263, which changed the Park District’s funding schedule and created a Tier 3. New hires after 2022 fall under Tier 3, which requires workers to pay 11% in contributions rather than the 9% mandated for previously hired workers.
Tier 3 allows them to retire slightly earlier than Tier 2 members – those hired between 2011 and 2021. Tier 2 members can choose to opt into Tier 3.
The law aims for full funding of the pension by 2057 and allowed the district to issue up to $250 million in pension obligation bonds, which the fund has not executed. It also implemented a new funding ramp to replace the flawed formula that had only required the district to pay 1.1 times what employee contributions had been two years prior, far below – sometimes only half – what actuaries said was needed. For example, in 2017 the actuarial determined contribution was $45 million, but the payment made was only $20 million.
Still, the 2024 numbers demonstrate how hard it can be to dig a pension system out of insolvency once the ratio reaches too low a point. At the end of 2024, the fund reported $16.7 million in unrecognized losses, which means the unfunded liability increased because investment returns fell short. This has been a chronic issue for the fund over the past 10 years.
Additionally, despite the changes made to Tier 2 and Tier 3 pensions to try to control costs, Tier 1 pensioners still working can continue to gain unsustainable retirement funds and those retired will continue to get their paychecks compounded by 3% each year.
State legislators have been trying to enact legislation that will spike benefits back to Tier 1 levels, arguing benefits are not as good as Social Security. That’s not true for the 2,097 Chicago parks retirees who received an average monthly benefit of $2,840. That equates to $34,080 per year, low compared to the high-paying police, fire, or municipal pensions in Chicago, but still $10,000 a year more than the average person receiving Social Security at $22,344 per year.
The park pension will replace up to 80% of an employee’s final average salary – their highest earning years. Social Security only replaces about 40% of your lifetime average earnings.
Rather than seeking to enhance benefits, Illinois lawmakers should preserve retirement security for public workers by seeking to control the costs that threaten the stability of pension funds. Benefits should be kept at levels that taxpayers can afford, otherwise the system will remain at risk of insolvency.
