Chicago Pension Squeeze: Fire Pensions Get a Loan as Tax Revenue Delayed; Pritzker Warned Against Signing Sweetener Bill, Signed Anyway

Huh, who could have predicted that?

Who could have predicted that, indeed?

Let’s hit the “short-term” problem first.

Chicago to Loan Cash to Fire Pensions Due to Delayed Tax Collections

Some of this is both misleading and accurate. It’s not a crisis, by the way (yet), but it is a function of the Chicago fire pensions being deeply underfunded.

First, the order of events.

Chicago/Cook County property tax bills - the second part - were supposed to be paid by August 1. The bills weren’t even sent out by then. Why?

16 Sept 2025, Loop North News: Chicago homeowners face uncertainty over delayed property tax bills

Taxpayers were supposed to pay their second tax installments on August 1, but the county hasn’t been able to calculate the final amounts and billions worth of tax bills haven’t yet been mailed.

As a result, the due date for taxes has been rescinded until the county can fix the issue. Cook County administrators don’t know when the second set of bills will go out.

According to the Illinois Policy Institute, a tax watchdog group, Cook County politicians blame a ten-year-old contract with Tyler Technologies, a Texas-based company, for the delay.

The contract was inked by the county in 2015 and allegedly was supposed to modernize the property tax billing system in three to five years.

However, repeated mistakes have flawed the system to the point that taxpayers could not expect to get correct bills if they were mailed today. Critics say the county finds itself unable to perform the basic function of tax collection, leaving taxpayers in limbo.

The Cook County Treasurer’s website features a banner indicating tax amounts have not been finalized and bills have not been mailed out.

Let me check. It is currently Friday, 19 Sept 2025 at 5:30 pm ET.

This is what the Cook County Treasurer’s website looks like:

8 Sept 2025, Illinois Policy: When will Cook County expect 2nd property tax payment? Good question.

Okay, so the property taxes that are usually due on August 1 did not come in.

I was curious about how much the property taxes in total were, and found the last published report by Maria Pappas, November 2024, and rather than go down that rabbit hole, let us just say that there is a cash flow hole of billions of dollars not coming into Cook County as a whole, and about $4-$5 billion not coming into the City of Chicago. These are rough, obviously. I also found this Property Tax 101… I will want to come back to this in another post, I think.

That’s step 1—no property tax collections at a critical point.

Step 2 is that the fire pensions are deeply underfunded. You can see that in these recent posts on STUMP: [For a little background reading, in case you’re interested]

• 17 Aug 2025 Updated Public Pension Projection Tool -- Includes Fiscal Year 2024 Data

• 4 Aug 2025 Podcast: Chicago Pension Artificial Sweeteners

• 25 July 2025 More on Chicago Pension Finance: Those Pension Sweeteners Sure are Sour

• 18 July 2025 Chicago Finances Update: Other People's Money Doesn't Go Too Far, Does It?

But this is a Friday, so let me cut to the chase. Here has been the trajectory of the Chicago Fire pensions’ funded ratio:

The funded ratio states the assets in the fund as a percentage of the liabilities, that is, the promised benefits they have to cover.

There’s no point in looking at the red line, which is the national average. The Chicago Fire fund has never been within spitting distance of the national average.

One of the posts above includes a simplistic spreadsheet model I made based on historical data of U.S. public pensions, and wouldn’t you know, I used Chicago Fire as one of my examples in the post.

The black bars going down are the cash flows of benefits going out to retirees. The solid green bars going up are contributions to the fund. The shaded green bars (up or down) are net investment income (which can be negative - this includes capital gains/losses — this is not, strictly speaking, a cash flow).

Let me not get too complicated here in the details. The concept, though, is that a well-funded pension plan (one much more funded than 20%, say) would be generating enough in investment cash flows to cover benefit cash flow needs, so that current benefits would not be dependent on current contributions.

But that’s not the situation with Chicago Fire.

So we get to the final step:

So, it’s a bit overblown… because when it comes to public finance, what do you really mean by insolvency?

This is what got Meredith Whitney, who was more used to the corporate sector, into trouble. You need to be very careful in describing what you mean. In public pensions… many don’t call it insolvency until you run out of assets. And even then, there’s pay-as-you-go (if you can).

But Chicago Fire has assets. They’ve got $1.5 billion.

The Chicago Fire pension plan could have liquidated some of its assets to pay current retirees.

Mmmm, and almost $500 million leaves every year? Hmmm.

My understanding is that Chicago is lending, short-term, $28 million to the pension to cover the immediate benefit payments. $28 million isn’t even one month’s worth of benefits, it looks like.

When Cook County finally gets its crap together and then the contributions come in from that revenue source… then Chicago should get paid back, and current benefits should also be covered.

That’s the short-term issue.

There’s a longer-term problem.

Pritzker Warned About Chicago Pension Sweeteners

17 Sept 2025, Fox 32, Chicago: Exclusive: Memo shows Pritzker's office warned about Chicago pension bill

New documents obtained by Fox 32 show that Gov. J.B. Pritzker's office was warned by Chicago officials that pension legislation could cause deep financial harm to the city.

Warning before the bill was signed

What we know:

The warning was sent to his office days before Pritzker wound up signing the bill. Critics say it will add billions to the city's financial problems.

The governor signed the so-called Tier 2 police and fire pension bill in early August, against the recommendations of financial watchdogs like the Civic Federation, who warned that it would add $11 billion to the city's financial burden over the next 30 years, with no clear way to pay for it.

The document they post is a 3-page letter, dated 8 July 2025.

It was from: Jill Jaworski, Chief Financial Officer, City of Chicago

Someone with skin in the game, as one might say. [Peering at the item above]

I will get to the contents of the letter from the CFO of Chicago, but let me get back to the news piece: [I added emphasis]

When asked why he signed, Pritzker responded that he didn't know Mayor Brandon Johnson's position on it.

"The mayor never once called me or, as far as I know, any legislators, to oppose that bill or ask for any changes in that bill," Pritzker said on Aug. 7 at the Illinois State Fair. "When a municipality is affected by some piece of legislation doesn't speak up about opposing it, than how can people know they oppose it?"

Oh, the mayor never told you that he didn’t like it.

But an internal memo obtained by Fox 32 Chicago shows that the city's Chief Financial Officer Jill Jaworski warned Andy Manar, a top official in Pritzker's office, about the financial ramifications of the bill.

….

The memo was dated July 8. A follow-up email dated July 28 reveals that Manar failed to receive the initial memo.

"My apologies for not getting this to you earlier," Jaworski says in the email.

…Excuse me?

I’m with Austin Berg on this ridiculousness: [click on the picture to get to X, where there is a video… or just click here]

This is the stupid “Mayor traipses to the state, cap-in-hand, too late” redux.

Also, in that video (it’s only 3 minutes), Martwick is wrong. The sweeteners do make the pension funds more insolvent, in terms of the cash running out faster.

Extending the amortization period tends to make pension funds more financially shaky, and increasing the benefit levels doesn’t make the situation better. The debt level will be higher.

At the next actuarial valuation, when the higher benefit levels have to be included, the funded ratio will drop for both the Chicago Police and Fire funds. It hasn’t happened yet.

The cash squeeze in the first item above isn’t even about the pension sweetener, if you can believe it. It’s about how grossly underfunded the fire pension fund is already, unable to support itself with investment income, and operational screw-ups in Cook County.

So let me go back to that 3-page letter from the CFO that “got lost”.

Back in July.

Jill Jaworski Memo

Memo On Hb3657 2025 07 07 1

318KB ∙ PDF file

Download

Download

I have always pointed out that the funding and the valuation of pensions are very different things (having worked in the financial reporting area, having to report the balance sheet under THREE different standards (at least) for an insurance company, I know how this works.)

When you say, “We just made the future cash flows for past service higher!”, it doesn’t matter that you promise to pay more later. That past service just became more valuable.

You don’t get to slide that in over 20 years. You may fund it over 20 years, but you promised it right now.

There is nothing magical about 20% fundedness any more than there was about 80%.

The funds are in a poor state at their current funded ratios.

Yes, they will be even worse at 17.something%, but that’s because they just had the benefits boosted without any good way to get them funded.

If you read the THREE-PAGE LETTER carefully, you will see the supposed issue re: IRS Safe Harbor is a red herring.

Other Chicago pensions have even worse situations with respect to Social Security benefit replacements…

….but seriously, almost none of these Chicago pension systems are going to generate lower benefits than Social Security under most situations. Especially now that Biden et al got rid of the windfall elimination provision/government pension offset.

And…. there’s a really easy fix.