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Chicago's Big Pension Gamble
Retirement under-funded? How about betting on a casino?
By The Editorial Board, WSJ
Jan. 2, 2023 5:08 pm ET
Chicago government-worker pensions are massively under-funded. So in typical Chicago-land fashion, the City Council is betting on casino revenue to plug the pension gap. Do taxpayers and workers feel lucky?
City aldermen last month approved a $1.7 billion casino and entertainment complex by Bally’s Corp. that will supposedly generate $200 million annually in tax revenue for the city police and firefighter pension funds—assuming financial forecasts prove accurate. Remember, this is Chicago.
The police and firefighter pension funds are only about 20% funded—among the worst in the country—even though 80% of city property tax dollars go toward pensions. The city’s annual pension payments have risen by $1 billion over the past three years. Perhaps the city would have less crime if it hired more police officers and paid less for pensions.
Blame Democratic politicians who over the decades have rewarded their labor allies with generous retirement benefits but haven’t socked away money to pay for them. Instead, Chicago’s political machine has frittered away taxpayer dollars buying votes. Illinois Gov. J.B. Pritzker last year signed a bill boosting Chicago firefighter pensions, which will cost taxpayers $850 million.
Meantime, rising property taxes, deteriorating public services and spiking crime are driving away businesses and workers who pay the city’s pension bills. Chicago lost about 45,000 residents between 2020 and 2021. A symbolic breaking point was Ken Griffin’s decision last year to move his Citadel hedge fund to Miami, citing Florida’s safer streets.
A deep national economic downturn could drive the city’s pension funds into insolvency. The Municipal Employees’ Annuity and Benefit Fund, the biggest of the city’s four pension funds, has been selling assets to pay pension benefits. It’s never good when funds are depleting their investment base, but it’s an even bigger problem when asset values are falling as they have this year.
Hence the casino gamble by the City Council and Mayor Lori Lightfoot, who is running for re-election in February. Their bet is that people from around the Midwest will flock to Bally’s like East Coast denizens once traversed to Atlantic City. The comparison is instructive. Atlantic City casinos struggled as they faced growing competition in the region. In 2021 Gov. Phil Murphy signed a bill providing aid to Atlantic City casinos to prevent four from shutting down.
If Chicago’s casino and pension bet fails, Illinois Democrats may next look to U.S. taxpayers to bail them out.