In 2009, just as the unfunded pension liabilities plaguing Chicago were coming into full public view ^[1], Cook County Treasurer Maria Pappas successfully urged the County Board to enact the Debt Disclosure Ordinance.

The DDO, as it's now known, requires more than 500 primary taxing districts — including school districts, the county, city and village governments, park districts and other smaller government agencies like mosquito abatement districts — to report their debt status to the Treasurer's Office each year.

The key statistics in that ordinance include each taxing district's local government debt, including all outstanding amounts borrowed through bonds and loans, as well as the unfunded government worker pension liabilities.

Over the years since, that debt has for the most part steadily increased, with a few deviations from time to time. That trend holds true in our most recent DDO report, released Tuesday, April 11. It shows that local government debt rose 1.6% to $160.5 billion from fiscal 2020 to 2021.

But there were some significant exceptions, both largely the result of an extraordinary year in government finance:

• Because government worker pension funds in the United States benefited from once-in-a-generation investment returns in the 25% range ^[2], the unfunded liabilities of suburban local government pension funds for police officers and firefighters dropped by more than $1 billion, to about $25 billion.
• Those pension investment gains, coupled with just modest increases in non-pension suburban debts, resulted in an overall drop of suburban total debt, by more than $800 million to about $25.1 billion.
• Although Cook County's two pension funds reported a $1.4 billion increase in unfunded pension liabilities, that report was made before the final fiscal 2021 results were in for the county's two pension funds. The county's pension funds actually lowered their unfunded liability by $4.2 million, according to a report from the Cook County Pension Fund ^[3].

The story was very different for the city of Chicago and the Chicago Public Schools, both of which saw their unfunded liabilities continue to grow in fiscal 2021. That's because neither the city's four worker pension funds ^[4] nor the Chicago Teachers' Pension Fund ^[5] had yet reached a point at which contributions and investment gains are sufficient to pay current benefit costs.

It is hoped that new efforts to ramp up contributions to levels designed to eliminate nearly all of the unfunded liabilities in the coming decades will reverse the trend in coming years, but that is not certain to prevent insolvency should there be a major economic downturn, as noted in the above linked blogs by Assistant DePaul Professor Amanda Kass, a public financing expert.

The booming pension investment market was not the only unusual story for local debt in 2021. While governments were flush with federal pandemic aid, local non-pension borrowing across the county increased by just 0.5%, to about $88 billion.

As our latest DDO report notes, both the unfunded pension liability and non-pension borrowing trends could be significantly different — i.e., grow substantially — when all the reports for fiscal 2022 are turned in later this year.

Government worker pension funds saw declines of nearly 10% in 2022 ^[6], and pandemic aid is drying up. So, higher unfunded pension liabilities are anticipated for 2022, while the cutoff in federal pandemic aid could over time spur local government officials to issue more bonds or otherwise increase their debt.

The Fiscal 2021 Debt Disclosure Report also includes several new features and analyses:

• The report explains how some government debt does not affect property taxes because it's paid off with other revenues. The clearest examples: Chicago airport bonds, which are paid off with landing fees and other airport-generated revenue, and Chicago's water-and-sewer project debt, which are paid off with water-and-sewer fees.
• The report notes that while high total debt owed by a local government often leads to higher tax rates, the converse also can be true: the inability of some financially struggling south suburbs appears to have led local leaders to increase property tax rates to deliver services and maintain infrastructure as best as possible.
• The report calculates the debt-to-property value ratio for dozens of government agencies that are partly in Cook County but extend beyond the county's borders. To make those calculations, the Treasurer's Office gathered the collar county property assessment statistics that were needed.

As always, the Treasurer's Office will continue to track these debt trends and update the public in as timely a fashion as possible.