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Pension expenses drag on municipal expenditures

Pension expense accounted for 13.5%, on average, of the 2017 annual expenditures of the 15 largest U.S. cities. Comparatively, general debt servicing accounted for about 10% of total expenditures. Chicago spent 27.6% of its 2017 budget on pension expense, more than twice the average and six percentage points more than the second highest, Dallas. S&P Global, which compiled the data, referred to this problem as “pension crowd-out,” where increasing pension costs are taking municipal revenues away from other areas of need such as public safety and public works.

The problem compounds itself as cities with limited resources or ability to meaningfully increase revenues see their credit ratings worsen and borrowing costs rise.

Chicago and Dallas had weighted plan funding ratios – the combined funding ratio of all the city's plans – of 26.4% and 43.9%, respectively. Chicago's funding improved 3.5 percentage points from 2015, while Dallas' decreased by 10.5 percentage points.