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Cook County Pension Liability Skyrockets from $6 to $15 Billion

Often referred to as America’s Most Corrupt County, Cook County, Illinois — which includes Chicago — was just forced by its actuaries to restate its unfunded pension liability from $6 billion to $15.3 billion.

Cook County has had over 150 top officials convicted in its 145-year history. Nothing seems to have changed, according to Huffington Post’s Cook County Corruption site. Recent headlines include “Sex, Booze, Sleeping On The Job At Cook County Water Parks”; “County Doctor Gets Big Payout For No Work”; “Court Clerk Charged With Taking Bribe To Sway Case”; and “Corruption Charges: Cook County Suburban Schools Supt. Arrested.”

But one area where Cook County was seen as only somewhat worse than the rest of America was public pension plan funding. Cook County’s website states that as of June 30, 2015, the Public Employees Retirement “Cook County Fund” was 60 percent funded and had a $6 billion unfunded liability. That compared as modestly worse than the 70 percent average funding for the 50 U.S. state and District of Columbia pension plans.

But a Freedom of Information Act request by former venture capitalist Mark Glennon, who runs Chicago’s Wirepoints News Service and is Co-Chair of the Illinois State’s Innovate Advisory Council, just discovered that a change in accounting standards by the Governmental Accounting Standards Board decreased Cook County’s funded status to just 36 percent and increased the unfunded liability to $15.3 billion as of December 31, 2015.

To put the importance of this stunning change of financial solvency in perspective, the entire annual payroll for all 22,000 Cook County employees is about $1.5 billion. That means that the pension plan’s shortfall is ten times the annual payroll.

Breitbart News reported in May 2014 that prior to Detroit filing a Chapter 9 bankruptcy, actuaries were paid millions of dollars each year to give their “best estimate” of pension plan liabilities without fear of being sued. Consequently, the actuaries tended to predict high future investment returns, so government entities could engage in pension benefit “spiking” while minimizing cash contributions to fund pension plans liabilities.

Outing Cook County’s spectacular unfunded public pension liability may be a tipping point event that causes similar Freedom of Information Act requests to be issued. In 2015, there were 299 state-administered funds and 6,000 locally-administered defined benefit public pension systems.

The Stanford University Institute for Economic Policy Research’s latest Pension Tracker report estimates that the public pension debt for just the 50 states and the District of Columbia jumped 84 percent in recent years, from $2.625 trillion in 2008 to $4.833 trillion in 2014.

Pension Tracker estimates the total public pension debt on a “market basis,” where all monies are invested in safe 20-year maturity Treasury bonds offering a constant yield of 2.18 percent, is about $41,219 per household, or about $15,037 per person in America.

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