Check the bills in your mailbox. Happening now in Chicago.
It has gotten so bad that the phrase “Pension Crisis” made it into Wikipedia. It’s the perplexing reality that municipal, state, federal, and corporate pensions in the US and similar schemes around the world are so badly underfunded that it will be impossible to fulfill the promises by a wide margin. By many trillions of dollars.
With state and municipal pension funds in the US, the situation is particularly tricky because the beneficiaries are voters and employees of the government, and politicians of all stripes bought their votes with promises of low contributions and rising benefits. They got away with it for decades because no one cares about “underfunded pensions.” Even the term makes people’s eyes glaze over.
But someone is going to pay. And it’s not going to be the politicians.
This is how they will pay for it in Chicago – the city whose credit rating Moody’s cut by two notches to junk in April last year, and whose interest payments, despite historically low interest rates, have continued to skyrocket as it borrows more and skids deeper into the sinkhole of its own making.
On Wednesday, the City Council approved Mayor Rahm Emanuel’s scheme to bail out its largest and worst-off pension fund, the Municipal Employees’ Annuity and Benefit fund, which would otherwise be insolvent within ten years – and a lot quicker if markets have a hissy fit.
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