Chicago mayoral challenger Susana Mendoza has vocalized serious concerns regarding the city's pension crisis, stating that the city is "teetering on insolvency." Mendoza, a former state comptroller, emphasized that a stock market downturn, particularly affecting the handful of AI giants driving current gains, could cause the four city employee pension funds to become insolvent. The fire and police pension funds are especially vulnerable, with assets covering just over 23% of liabilities, compared to an average of about 70% in other major cities.
Chicago's pension debt increased by approximately $500 million in 2025, reaching $36.4 billion. This represents a nearly 11% increase, or $3.5 billion, since 2020. The police officers' fund is only 25.5% funded, and the firefighters' fund is 25.2% funded. The municipal workers' fund stands at 28.2% funded, while the laborers' fund has the highest funded level at 44.1%. The city faces a record $3 billion pension payment in 2027 to comply with state laws requiring 90% funding by 2055 for two funds and by 2058 for the other two.
Mendoza proposes a "come to Jesus" reckoning with union leaders to address the crisis, suggesting difficult conversations about consolidations and concessions to stabilize the budget. She advocates for consolidating and professionally managing the funds, noting that a similar approach at the state level reduced Illinois' pension obligations by about $2 billion. Other potential solutions include pension obligation bonds and offering city employees a deferred retirement option, allowing them to trade future pension benefits for a lump-sum payment. This latter option, if authorized by state lawmakers, could be offered to Chicago's 33,432 employees, similar to existing state-level programs.
