Chicago Not Alone In Calling For Pension Cuts

For the first time since he became mayor of Chicago, Rahm Emanuel visited the state capitol.  His visit focused on the same issue that’s consuming state leaders … the rising cost of pensions.   Like Governor Pat Quinn did last month, Emanuel yesterday introduced a plan that cuts government employees’ retirement benefits. And Like Quinn, Emanuel is facing pushback from workers who say that’s an illegal breach of contract.   Amanda Vinicky has more.

Chicago Mayor Rahm Emanuel was careful to not lay the blame on government employees:

:We do not face these challenges in the city, or in the state, because our public employees or our taxpayers did anything wrong. They did what was required of them every pay stub,” he said.

The people who did not do what was required of them were political leaders in Chicago and Springfield.

The city and the state continually pushed off paying their shares of pensions costs, instead spending the money on projects and programs with an immediate payoff.

“The day of reckoning was pushed down the road and the can was kicked down the road,” he said.  “We postponed making choices, and made promises that couldn’t be kept … But this is one challenge we can’t run away from.”

Illinois has the largest unfunded pension liability in the nation. And Chicago says if nothing’s done, four of its pension funds will be insolvent by 2030.

Emanuel laid out a stark choice: enact changes to bring down the city’s pensions costs or the money he’ll have to spend on pensions will squeeze out funding for other services, like road repair, police and fire protection, and garbage pickup. Emanuel says he’d have to layoff teachers and increase classroom size to 55.  Or, he says, Chicago’s property taxes would have to go up 150%.

“Just think about it,” the mayor said.  “No family or company will come to Chicago if property taxes climb so quickly and so high … Raising property taxes by 150% would ruin family budgets, corporate budgets, municipal budgets, and ultimately the state’s budget.”

Emanuel put forth his own plan for digging Chicago out of the mess.

Like Governor Quinn’s state plan, Emanuel wants city employees to work longer and pay more for their retirement.

But unlike the governor, who leaves current retirees’ benefits untouched, Emanuel wants a ten-year freeze in annual cost of living adjustments for anyone who’s already retired.

He says the compounded COLAs are the single biggest burden and threat to Chicago’s pension system.

But Emanuel can’t make these changes on his own.

He needs permission from the legislature and governor.

The mayor’s capitol appearance, private meeting with Republicans, and brief speech on the House floor may boost his chances.

“I think his presence is helpful on pension reform across the board,” House Speaker Mike Madigan said.

Across the board is an apt description for what may be coming.

It’s not just Chicago that’s calling for a pension fix.

The Illinois Municipal League’s Legislative Director, Joe McCoy, says cities across Illinois are facing similar problems of growing unfunded liabilities.  He says it’s a disturbing trend that’s grown in recent years, as stock values tumbled.  McCoy says there’s not much municipalities can do about it.  They don’t decide what retirement benefits should be offered to employees. The state does.

“The biggest structural problem we have with the system is that the state gets to dictate what the pension benefits are and they don’t have to put in a single dime toward funding the financial obligations that they’ve imposed on local taxpayers,” McCoy said.  “So they don’t have any real incentive to restrain themselves from enhancing benefits.  Because they reap all the political benefits of increasing the pension levels, without having to pay the bill.”

McCoy says cities across Illinois need the state to do something to rein in their pension costs.  And he says in order for it to work, it must include cutting current employees’ benefits.

But that’s where it gets tricky.

Illinois’ constitution guarantees public pensions can’t be diminished, which puts both Emanuel’s and Quinn’s plans in legal jeopardy.

“A guy does 30 years, 27 years down the road you can’t just change the rules of the game for the employee,” President of the Fraternal Order of Police of Chicago, Michael Shields, said. “It’s an individual contract between the employee and the employer and you cannot reduce those benefits. It’s against the Constitution of Illinois.”

Shields says the mayor was trying to alarm taxpayers, pitting them against police officers and other public employees who’ve worked hard to earn their pensions.

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