Dear Mr. President,

We write to you as Chicago pensioners, city workers, taxpayers, and concerned citizens to request your urgent attention to a financial crisis that threatens not only our city but the economic health of one of America's great metropolitan regions. The underfunding of Chicago's public pension systems has reached a point where, without decisive federal engagement, the consequences may become irreversible.

The Scope of the Crisis

The Chicago metropolitan area is the third-largest economy in the United States, with a GDP of approximately $726 billion. It is home to nearly 10 million people and represents an economic engine of national significance. Yet the city government at the center of this region faces pension obligations that it could very well not meet.

               https://www.cities929.com/2026/08/03/op-ed-chicagos-pension-funded-ratio-rose-two-rating-agencies-downgraded-the-city-anyway/

               
 Chicago’s four city pension funds closed 2025 with $14.20 billion in assets against $50.63 billion in liabilities, a funded ratio of 28.1%, up from 25.4% a year earlier, according to the city’s 2025 Annual Comprehensive Financial Report, released June 30. If that sounds like good news, ask Fitch Ratings and Kroll Bond Rating Agency, which downgraded Chicago’s general obligation bonds five months earlier anyway. I’ve spent 30 years structuring credit exposure for family offices and institutional allocators, including work in distressed situations. A three-point move in a funded ratio tells you almost nothing about repayment capacity on its own. It tells you what a strong investment year did on a thin asset base. The people who price Chicago’s debt for a living looked at the same numbers the city is calling progress and moved in the other direction. Do the arithmetic the city didn’t lead with. Assets rose 14.4%, from $12.42 billion to $14.20 billion, mostly on market returns. Liabilities rose too, from $48.95 billion to $50.63 billion. Net unfunded liability barely moved, from $36.53 billion to $36.43 billion, a rounding error against a $36 billion hole. At a fund holding less than 30 cents on the dollar, that’s not recovery. That’s a system treading water in a year the tide happened to come in. Below 40% funded, standard actuarial convention says compounding returns alone can’t close the gap anymore. Below 60%, plans are “deeply troubled.” Chicago’s four funds sit at 28.1% combined, and police and fire are worse individually: 25.5% and 25.2%, per the same ACFR. Seven of the ten worst-funded local pension plans in the country are Chicago’s, and the city’s unfunded pension debt now exceeds that of 44 individual states, per Equable Institute data. Every business owner paying Chicago’s property tax bill is subsidizing a system that ranks worse than almost anywhere else in the country, and the trend line hasn’t reversed. Then there’s the sweetener nobody’s reconciled. Gov. J.B. Pritzker signed the police and fire pension enhancement in August 2025 over Mayor Brandon Johnson’s objections. City estimates at the time put the long-run cost at $11 billion. The audited 2025 ACFR shows something narrower: the law added $300.4 million to the city’s reported net pension liability this year, $157.9 million to police and $142.5 million to fire. Both numbers can be true at once. One is the first-year GASB recognition; the other is the present value of decades of enhanced benefits. The city hasn’t explained the gap publicly. The rating agencies didn’t wait to find out. S&P moved Chicago’s outlook to negative in November, citing reliance on one-time budget fixes and a reduced advance pension payment. Fitch and KBRA both cut the city’s general obligation rating from A-minus to BBB-plus on February 25, pointing to deteriorating fund balance and a fixed-cost burden that could crowd out other spending. That’s two full-notch downgrades and a negative outlook from three separate agencies inside four months, on a city whose pension-funded ratio was already climbing. Chicago faces a statutory ramp requiring 90% funding by 2055 for two funds and 2058 for the other two, pushing the required pension contribution toward $3 billion by 2027. Meeting that schedule while running structural deficits means every good year buys the city exactly one good year. It doesn’t buy the trend. For anyone doing business in this city, borrowing against it, or lending into it, the number that matters isn’t the funded ratio the mayor’s office will highlight this fall. It’s the one three rating agencies already priced in. Treat the 28.1% as data. The market already told you what it means.

How We Got Here

This crisis did not happen by accident. It was built, decision by decision, by elected officials, both at the State and city level, who chose short-term political comfort over long-term fiscal responsibility. They have dug a financial hole so deep it may be the grave for the Chicago municipal pension system.

Mayor Richard M. Daley, with the cooperation of the Illinois State Legislature, presided over a prolonged pension contribution "holiday" in which the city paid little or nothing toward its pension obligations for years. Mayor Rahm Emanuel subsequently secured legislative changes that restructured Chicago's funding obligations, pushing significant payments decades into the future and back-loading costs in a manner that added substantially to total unfunded liability.

               https://chicago.suntimes.com/2024/04/12/chicago-got-buried-under-mountain-pension-debt-34-billion-ralph-martire-column?lang=en_US

               Then Governor vetoed this measure stating in part:

 “While I appreciate the effort to address the insolvency of certain pension funds for Chicago’s public employees, the legislation will create another pension funding cliff that the city does not have the ability to pay. This legislation will result in increased taxes on Chicago residents.”

               “Short-term fixes like Senate Bill 2437 are not the answer and in fact are what has led to our current pension woes. This practice has to stop. “   Gov. Bruce Rauner’s office calculates the additional cost over time to be $18.6 billion to taxpayers.  Friday, March 24, 2017

               More than $18.5 billion of Chicago's current pension debt is attributable not to benefit costs, but to the compounding interest on years of underfunding — the financial equivalent of carrying an ever-growing balance on a credit card with no ceiling.

               Actuarial science is precise. It is beyond credibility that these officials did not received analyses that told them, in unambiguous terms, how much was required to fund these obligations and what the long-term cost of deferring payment would be. Rather than deal with the issue the leadership abandoned its responsibilities, betrayed the public trust deciding that the short term self-interest of political expediency was more important than the city’s future.

Why Federal Action Is Warranted

               A Chicago municipal bankruptcy would not be a local event. It would send shockwaves through the bond markets for municipal debt nationwide, threaten the retirement security of tens of thousands of first responders and city workers who fulfilled their obligations in good faith, and accelerate the population and economic decline already underway in the region. Chicago's GDP already trails the national average.

               Chicago’s has the dubious distinction of carrying more debt that 44 states, a financial outlook with no good news, is the top contender for a major municipal bankruptcy.

               Thinking that this embedded political bureaucracy can solve the problem they willfully created is not just wishful thinking but a ludicrous phantasy. The federal government has a clear interest in the stability of major American cities. We are not asking for a bailout that rewards failure. We are asking for a structured lifeline, one that uses funds already flowing to Chicago in a more targeted and accountable way.

               This “life line” is both politically and economically a good solution. Chicago and Illinois are the poster child for political mismanagement but only claiming first place. The specter of other municipalizes facing bankruptcy is very real. The size of the underfunding across the country is such that at some point federal involvement is certain. This would set a precedent, put down a marker for other local governmental bodies regarding their responsibilities. The scope of underfunded municipal pension’s nationwide are a real threat. Estimates range from 1.48 trillion to 4.582 trillion dollars. 

Hoover Institution (using market-based/risk-free discount rates rather than the higher assumed investment returns actuaries use): the officially reported net pension liability was $1.638 trillion at the end of FY2023, but the market-based net pension liability — using a discount rate reflecting the actual risk of the promised benefits — was $4.582 trillion, down from $5.183 trillion in FY2022. Hoover Institution

A Proposed Framework

                How do you crack the shell of an entrenched irresponsible cynical political bureaucracy that has abandoned its responsibilities , betrayed the public trust for decades, in favor of short term political self-interest? .The only way is the nuclear option, ground zero being the pension funding itself. A bailout being wrong for many reasons instead a life line using federal funds the city would otherwise receive.   

               Chicago currently receives approximately $3.5 billion in federal grants annually. We respectfully petition the Administration to explore the following framework:

               Sign an executive order clarifying that first responder pension obligations shall be treated as secured liabilities in any municipal bankruptcy proceeding. The police and Fire dept. pensions carry a large component of the underfunded pension liability. By taking that off the table it would make a bankruptcy impracticable there by preventing the politician from solving the problem they made on the backs of all city workers.   

               As an emergency measure, a portion of federal funds flowing to Chicago should be conditionally earmarked directly to the pension funds. No matter how worthy the use of those funds in the face of a city bankruptcy they are moot. This redirection should remain in effect, with the following binding conditions attached:

•             If any pension funds are used — directly or indirectly — to purchase municipal debt or finance city projects, a like amount is further redirected from federal allocations to the pension funds.

•             The willingness of the state legislature to be an active participant in this irresponsible governance makes it necessary that if for any reason Chicago’s current payment schedule is missed or reduces the funds earmarked will be adjusted to compensate. 

•             The arrangement continues until all affected pension funds reach a 90% funded ratio.

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Conclusion

               The public employees who earned these pensions — the firefighters the police officers the teachers who worked through decades of difficult conditions, all the municipal workers who kept the city running — honored their end of the bargain. The city's political leadership, repeatedly and knowingly, willful mismanagement caused this to happen. By removing the threat of bankruptcy the city can build back.    

               We are not seeking to excuse mismanagement or shield Chicago's political class from accountability. We are asking that the federal government use the leverage and resources at its disposal to ensure that ordinary working people do not bear the full cost of willful decisions made by those long retired from public life.

                              The success of this effort would put up some needed guard rails to protect the local citizen from responsible decisions. Protect the people who keep the municipalities functioning. Protect the rest of the country from the price of reckless local political leadership.  

               Certainly all Chicago city employees should be concerned, if currently collecting a pension or still working and hoping the light at the end of the tunnel doesn’t go dark you have been poorly served by the leadership. The citizens of Chicago have an equally large stake in this as well, a bankruptcy would send the city into unknown waters. Supporting this measure will help put a major economic component of the country back on course. 

               The “Ramp” is not the best way to address the pension funding issue but it will when completed put the pensions in a stable actuarial position, these proposals support the city’s own plan, it does not bail the city out. What it will do is backstop the city’s plan. Anyone who is optimistic of the city’s economic future can only embrace these measures, any pessimist would become an optimist supporting them. There proposals are a win-win situation, the city is under a cloud of speculation of the possibility of defaulting on a very large debt, this removes that threat, protects the current and future retirees. Greatly improve the city’s bond rating, restore confidence at all levels.

               The undersigned respectfully submit this proposal for you consideration and action.