EDITORIAL: Chicago’s pension pain a warning to Nevada

Crime isn’t the only major problem facing Chicago. Its underfunded pension system is devastating its finances and offers a clear warning to Nevada.

Last month, Illinois Gov. JB Pritzker signed a bill increasing pensions for Chicago police officers. The city estimates it will increase pension liabilities by more than $11 billion. It will cost Chicago $60 million in 2027 and a stunning $753 million in 2055. That won’t be Chicago’s total annual pension obligation. That’s the new projected spending from a single bill.

In Nevada, local pensions are administered by the state-run Public Employees Retirement System. In contrast, Chicago administers its own pension funds for city workers. It’s not going well. At the end of last year, its public safety pensions were about 25 percent funded. As a result of this bill, that funding ratio plummeted to 18 percent. That means the city will have less than 20 cents for every dollar it needs to pay out. Its other pension funds are also dramatically underfunded. In 2024, the Chicago Tribune reported that the city’s pension debt topped $37 billion.

This fiscal mismanagement has led to significant increases in pension contributions. Illinois Policy found that Chicago’s annual pension payments grew from under $500 million in 2014 to $2.75 billion in 2024. That easily outpaced a doubling in property tax collections.

There are two reasons pension debt is so debilitating. The first is that pension plans depend on robust investment returns to cover future costs. Yes, public pension plans are funded by the success of private businesses. Thus, backfilling a dollar not invested in 2005 doesn’t just cost $1 in 2025. The government must also replace decades of missing investment returns. Working against compound interest is never a good idea.

The second is that these ballooning pension payments provide no value for current taxpayers. They don’t repair roads, fund parks or improve public safety. It’s like paying off a high-interest loan taken out by the previous owner of your home.

Now, Nevada PERS is in better shape than Chicago’s pension funds. But that doesn’t mean it has a clean bill of health. In 2022, the combined PERS contribution rate for local police and fire employees was 44 percent. Today, it’s 58.75 percent. Just like Chicago, this extra money is going to pay down pension debt. If the economy goes south, those contribution rates will likely shoot even higher.

What’s happening in Chicago is a reminder of why Nevada should move towards individual retirement accounts. Taxpayers today shouldn’t be stuck paying off pension debt that accrued decades earlier.