Key Takeaways:
Illinois Comptroller Susana Mendoza's mayoral challenge to Brandon Johnson puts Chicago's 28.1% pension-funded ratio — among the worst in the nation — at the center of the 2027 election.
Chicago's public pension funds, funded at just 28.1% of liabilities last year, face insolvency risk if equity markets decline, Illinois Comptroller Susana Mendoza said as she launched a challenge to Mayor Brandon Johnson.
"If the market gets a cold, I don't even know that we'll survive with pneumonia," Mendoza, a Democrat, said in a Financial Times interview, warning the city's pension system is in "the area of near-insolvency."
Chicago's aggregate pension funded ratio compares with a national average of 82.5%, according to recent data. Detroit's pension funds were 60% to 80% funded when the city filed for bankruptcy in 2013. Chicago's pension costs have doubled over the past six years and now consume about 80% of the city's property tax revenue, according to the Wall Street Journal Editorial Board.
The fiscal strain comes as Governor JB Pritzker signed legislation boosting benefits for younger Chicago police officers and firefighters, adding to long-term liabilities. If markets decline, the city may be forced to pay retirees directly from general tax revenue, potentially triggering a request for a federal rescue.
Pension Costs Double as Property Taxes Hit Limits
Chicago property taxes rank among the highest in the nation, yet residents receive fewer public services as pension obligations consume the bulk of property tax dollars. The city's pension costs have doubled over six years and are the biggest driver of its budget deficits, according to the WSJ. State lawmakers, including Pritzker, have sweetened benefits over time, while local politicians for many years diverted money from pensions to boost pay for government union employees.
The lower a pension fund's funding ratio, the harder it becomes to dig out of the hole even as taxpayers contribute more to keep the shortfall from growing. Chicago's 28.1% ratio means the city would need to generate returns or contributions equal to more than three times its current assets to reach full funding — a mathematical challenge compounded by the fact that the funds assume aggressive annual return targets.
Political Challenge Puts Fiscal Reform on the Ballot
Mendoza's decision to challenge Johnson in the 2027 Democratic primary brings the pension crisis directly into electoral politics. She has positioned herself as a fiscal realist willing to tell voters uncomfortable truths about the city's finances, contrasting with Johnson's approach of avoiding a public stance on major fiscal decisions such as the proposed $2.53 billion sale of Chicago's parking meter system to Stonepeak.
The parking meter deal, which requires City Council approval, has exposed divisions among aldermen. Budget Committee Chair Jason Ervin, a Johnson ally, came out against the sale on July 13, arguing the city should instead create a taxpayer-backed trust to acquire the system. Finance Committee Chair Pat Dowell delayed a planned vote the same day, keeping the proposal alive but facing uncertain prospects.
The last time Chicago faced a fiscal crisis of this magnitude was in the early 1980s, when the city issued $875 million in bonds to shore up its pension systems after the funds fell to roughly 40% funded. That rescue bought three decades of stability before underfunding resumed. Today's 28.1% ratio is worse than that baseline, and the city has fewer options: property taxes are already near their limits, and the state legislature has shown no appetite for a Chicago-specific bailout.
Mendoza's campaign will test whether Chicago voters are willing to accept pension reform that may require higher taxes, reduced benefits, or both. Johnson has not yet announced whether he will seek re-election. The primary is expected in February 2027.
This article is for informational purposes only and does not constitute investment advice.
