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Chicago Has a Pension Crisis, but It’s Not Progressives’ Fault [1]

['Dean Baker', 'Timothy Noah', 'Prem Thakker', 'Tori Otten']

Date: 2023-07-19

Why does all this matter? Most immediately for this piece, it matters because it means that the Chicago system’s liabilities effectively include money that would be paid by Social Security to public-sector workers in other cities. That hugely inflated the size of its liabilities relative to cities where workers do get Social Security benefits in addition to their pensions.

The fact that public-sector workers are not in the Social Security system also raises another important point. For most workers, of course, employers contribute their share of employees’ wages to Social Security—under current law, 6.2 percent. The city of Chicago does not have to make those employer-side contributions. This 6.2 percent employer contribution is money that other city governments must send to the Social Security program every year. But Chicago, since it doesn’t have to make these payments, can instead use this money to meet its pension obligations. If we adjust for these differences, the Chicago system doesn’t look as out of line with the other cities as the Bloomberg graph indicates.

The graph shows that pension expenses in Chicago are equal to 30.1 percent of total government expenditures. In San Jose, the city with the second-most expensive pension contributions, payments are shown as being 18.7 percent of total expenditures. Assuming that payroll makes up the bulk of the budget, if we add in the 6.2 percent of wages paid as Social Security taxes in San Jose, it would take its payments for pensions to over 24 percent of expenditures, closing roughly half the gap with Chicago.

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[1] Url: https://newrepublic.com/article/174429/chicago-pension-crisis-brandon-johnson-progressives

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