Impact of The City of Chicago’s 2009-2011 Furloughs on Employee Pensions
Summary
In July 2009, the City of Chicago and a number of the City’s labor unions entered into an agreement to amend existing collective bargaining agreements for two years, to help the City address its budget deficit and avert layoffs. This IGO report details the financial impact of this program on the City budget.
Executive Summary
Based on the foregoing analysis, the IGO concludes that the savings from the City’s furlough program were overstated by approximately $11.05 million as a result of a reduction in employee contributions to the City’s pension funds which will need to be covered by the City at a future time. Additionally, the furlough program will have resulted in a corresponding reduction of approximately $13.5 million in the City’s contributions to its employee pension funds. The combined effect is a $24.55 million overall reduction in contributions to the already gravely underfunded City employee pension funds. These findings should not be construed as a criticism of the furlough program itself, through which the City in fact has realized substantial budgetary savings. Instead, this report is provided to correct the existing record regarding reported savings and to clarify its impact to the City’s pension funds. These effects should be incorporated into calculations regarding future furloughs.
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