Chicago, Other Cities Face Huge Tab for Their Government Pensions

David C. John / October 19, 2010

It turns out that many city public pension plans are just as underfunded as various state plans are. For instance, Chicago has only about $22 billion in pension assets to pay for $66 billion in pension promises to its city workers, while New York City has $93 billion available to pay $215 billion in city pension promises, and Boston has only $3.5 billion available to pay $11 billion in promises. That means that every household in Chicago has a liability of about $42,000 just to pay pensions to city workers, while each household in New York City owes $39,000, and each in Boston owes about $31,000. These are existing pension promises and would remain the same even if that city’s pension plans were frozen.

A new report by Robert Novy-Marx of the University of Rochester and Jonathan Rauh of Northwestern University—the same academics who did an earlier report on underfunded state pension plans—says that major pension plans for city workers have a combined estimated underfunding of $574 billion. This is on top of the $1.8 trillion to $3.4 trillion underfunding for state public pensions. (more…)