An Exclusive by The Fiscal Times
By Marc Joffe
Chicago and New York rank at the bottom of a new analysis of fiscal
strength based primarily on data from 2015 financial reports issued by
the cities themselves. The analysis includes 116 U.S. cities with
populations greater than 200,000. See the full rankings here.
Chicago’s position at the bottom of the ranking is no surprise to
anyone who follows municipal finance. The Windy City has become a poster
child for financial mismanagement, having suffered a series of ratings
downgrades in recent years. Aside from having thin reserves and large
volumes of outstanding debt, Chicago is notorious for its underfunded
pension plans.
For example, the city’s Municipal Employees' Annuity and Benefit Fund (MEABF) reported
$4.7 billion in assets and $14.7 billion of actuarially accrued
liabilities at the end of 2015, representing a funded ratio of just 33
percent. The actuarial calculations rely on a controversial practice of
discounting future benefits at a rate of 7.5 percent, which is the
assumed return on the fund’s portfolio return. If a more conservative
assumption was employed, MEABF’s liabilities would be higher and its
funded ratio lower.
Click here for the full article.
Source: TFT (via The Empire Report)
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