Illinois Lawmakers Pass Bill to Slash Chicago’s Required Pension Payment By $200 Million

The city of Chicago, until this weekend, was on the hook for a $550 million payment to its police and fire pension funds due by 2016.

But state lawmakers are trying to cut the city a break, passing a bill that slashes the required payment to $330 million and spreading the rest over future years.

Some lawmakers praised the moved, but other parties – including Moody’s – thought it was a bad idea. From Bloomberg:

Mayor Rahm Emanuel had sought the payment reduction, which cuts to $330 million a scheduled additional contribution of $550 million to the police and fire funds due next year.

Cullerton, moments before the Senate voted, called the bill prudent.

“It’s not kicking the can down the road,” he said. “It’s restructuring the obligation to get these things funded, and it’s doing it in a way that’s responsible.”

But Senator Matt Murphy, a Republican from suburban Palatine, said the measure meant the city could avoid facing its crisis.

“This is nothing more than a pension holiday,” he said before the vote. “They need to start taking it seriously in Chicago. Otherwise, they’re going to be in a situation where bankruptcy does become real for these funds and maybe beyond.”

Pension liabilities have contributed to dramatic reductions in Chicago’s credit standing, and Moody’s Investors Service warned May 1 that delaying the day of reckoning was unwise.

“Any reduction in city contributions would have a deleterious effect on the plans’ already precarious condition,” Moody’s said in the report. “As the plans approach insolvency, risks to the city’s solvency will grow.”

The $220 million slashed from 2016’s payment will be spread out over future years. The bill has yet to reach the Governor’s desk.

Photo by bitsorf via Flickr CC License