Chicago grappling with pension fund shortfalls

The Chicago Sun-Times reports:

The Daley administration has opened an uncomfortable dialogue with union leaders about a problem that threatens to saddle future generations of Chicago taxpayers with a debt they can't handle: underfunded city pension funds.

The solution City Hall is seeking could include everything from benefit reductions and increased employee contributions to a shift away from "defined-benefit" pension plans and toward the "defined contributions" or 401(k) plans favored by private industry.

The only thing certain is that something's got to give. If nothing changes, the police and firefighter pension funds will run out of money in 20 and 23 years, respectively. And within a decade, those same funds will have to liquidate investments to pay benefits. The day of reckoning for the Municipal Employees and Laborers Pension Funds is not all that far behind.

If pension funds run out of money, Chicago taxpayers get stuck with the tab. Last year, pension obligations cost the city $425 million -- more than 15 percent of Chicago's corporate budget. That's expected to rise by roughly $50 million in 2007, now that the Laborers Pension Fund has dipped below the state-mandated 100 percent funding level.

When you're deal is too good,it can't last forever.