CHICAGO - Strong double-digit investment returns in fiscal 2013 couldn't stave off funding deterioration for some of the 11 pension funds that cover Chicago area governments and local government employees throughout the state.
The Illinois Municipal Retirement Fund, which covers non-public safety local government employees outside of Chicago and Cook County, stands out as the healthiest of 11 funds covered by the General Assembly's Commission on Government Forecasting and Accountability's review of 2013 results.
The results are based on actuarially smoothed results, not market value.
The IMRF is funded at nearly 88%, up from 84% in 2012 with $4.3 billion of unfunded obligations, down from $5.1 billion a year earlier. The IMRF recorded a 20% return on assets while assuming a 7.5% rate.
The unfunded liabilities for eight funds for employees of Chicago and the related agencies of its schools, park district, transit agency, and water district totaled $32.5 billion at the close of fiscal 2013 for a collective funded ratio of 41.9%. The figures don't include the state local government fund or Cook County funds.
While legislation in the last two years has overhauled some of the city-related funds in an effort to stabilize funding levels, city and county officials are still awaiting action on efforts to reform the others. A new session of the General Assembly begins early next year with Gov.-elect Bruce Rauner at the helm.
The city's Firemen's Fund saw its unfunded liabilities rise slightly to $3.15 billion from nearly $3.1 billion with the funded ratio also declining slightly to 24.2% from 24.4%. The fund recorded a 22% rate of return while it assumes an 8% investment return.
The Policemen's fund also deteriorated with unfunded obligations of $7.2 billion and a funded ratio of 30% in 2013, compared to $6.9 billion of unfunded obligations and a funded ratio of 31% a year earlier. The fund recorded a 14.5% rate of return while assuming a 7.75% rate.
The contribution schedule for both city public safety funds would put them on the path to reach a 90% funded ratio in 2040 under a prior state mandate. But meeting that schedule will force the city to increase its annual police and fire contributions by $550 million starting in 2016 if Chicago Mayor Rahm Emanuel doesn't receive state relief from the mandate as part of a reform package the city hopes to win next year.
City efforts have stalled as police and fire unions await an Illinois Supreme Court review of state retirement changes approved in December 2013 to determine whether they pass constitutional muster. A lower court overturned the state changes late last month. If the Illinois Supreme Court agrees, unions would gain the edge in reform negotiations.
The Chicago Laborers' fund reversed a years' long record of deterioration with its unfunded obligations shrinking slightly to $1.04 billion from $1.06 billion and the funded ratio improving to nearly 57% from 55%. The fund saw a rate of return of 15.8% compared to an assumed rate of 7.5%.
The Chicago Municipal Employees fund deteriorated slightly with $8.7 billion of unfunded obligations from $8.6 billion with its funded ratio falling to 36.9% from 37.2%. The fund saw a 15.9% rate of return while assuming a 7.5% rate.
The calculations don't include a city sponsored reform package approved by the General Assembly earlier this year for the laborers' and municipal funds. It takes effect Jan. 1 and will put the funds on track to reach a 90% funded ratio in 2055 through higher contributions and benefit changes.
If the changes were incorporated into the 2013 figures, the laborers account would rise to 69% funded but then drop into the 50th percentile in the coming years before rising back into the 60th percentile in 2040, according to a schedule provided to the commission by the fund.
All of the calculations on the city's four funds include retiree healthcare benefits, and the figures benefit from Chicago phasing out subsidies for most retirees, although the city's move is the subject of an ongoing legal challenge.
The Chicago teachers' fund struggled with its unfunded liabilities rising to $9.6 billion for a funded ratio of 49.5% compared to $8 billion and a funded ratio of 54% year earlier. The fund saw a 13.3% rate of return while it assumes a 7.75% rate.
The school system is also banking on state approval for reforms next year as it grapples with rising payments.
The Chicago Park District's unfunded obligations grew to $484 million for a funded ratio of 45.5% from $426 million and a funded ratio of 51%. The funded ratios are slated to slowly improve through 2046 when a funded ratio of more than 90% is projected under reforms approved by state lawmakers that take effect Jan. 1. The parks' fund saw a return rate of 16.9% on its investments while it uses an assumed rate of 7.5%.
The Chicago Transit Authority's unfunded liabilities grew to $1.2 billion from $1.16 billion although its funded ratio improved to 61% from 59%.
The agency saw a 19.5% rate of return for the year, compared to an 8.25% assumed rate. The figures don't include retiree healthcare liabilities.
The Metropolitan Water Reclamation District saw its liabilities drop slightly to $1.01 billion from $1.06 billion with the funded ratio rising to 54% from 50%. The district recorded a 21.7% rate of return while it actuarially assumes a 7.75% rate.
The Cook County fund's unfunded obligations dropped to $6.4 billion from $6.8 billion with its funded ratio improving to 57% from 54%. The county saw a 15.1% rate of return, higher than its 7.5% assumed rate. Its figures include retiree healthcare liabilities.
The county's funded ratios are projected to further slide in the coming years. "Under the current funding laws the Cook County Employees' Pension Fund is projected to run out of assets by 2038," the report warns.
County board president Toni Preckwinkle is pressing state lawmakers for a reform package. It stalled earlier this year, but the county is hoping to win approval in the coming months.
The Cook County Forest Preserve's unfunded obligations dropped to $124 million from $132 million with the funded ratio improving to 59.5% from 57%. The fund saw a 17.5% rate of return, while assuming a 7.5% return. The figures include healthcare liabilities. The fund is on pace to exhaust its assets in 2038.
A recent report from the Civic Federation of Chicago based on 2012 results found local and state unfunded pension liabilities grew to nearly $20,000 for each Chicago resident.
The aggregate unfunded actuarial accrued liabilities for 10 local funds reviewed annually by the federation increased by nearly $26 billion to $37.3 billion from $11.4 billion between fiscal 2003 and 2012. Unfunded liabilities per capita in Chicago for the ten funds rose from $3,359 in 2003 to $12,233 in 2012. Chicago's four funds represented $7,281 of the per capita figure.
The federation added in the cost for a Chicago resident to cover the state's $100 billion of unfunded liabilities to reach the near $20,000 per capita figure for city residents.
"The pension funding crisis in Illinois is the result of decades of insufficient oversight and ignorance of actuarial reality," said federation president Laurence Msall. "Even with recent reforms, it will be many years before these funds are fully stabilized."