Chicago Mayor Rahm Emanuel spent time in Springfield today to lay out his proposal for handling the state's underfunded pensions - and his suggestions are not being well-received by union leaders.
Emanuel testified in front of the Illinois House Personnel and Pension Committee Tuesday, giving lawmakers his "Roadmap to Retirement Security" plan that would lower the underfunded pension liability by 40 percent - like Gov. Pat Quinn's unpopular proposal, with which Emanuel's shares many similarities.
But Emanuel's plan calls for even more controversial reforms including: raising the retirement age by five years, making it 60 for firefighters and police officers and 67 for civilian workers; imposing a 1 percent increase on contributions annually over the next five years for current employees; putting a 10-year moratorium on annual cost-of-living increases for current retirees, a benefit Social Security beneficiaries enjoy; and offering new hires two options - a 401k or defined benefit pension plan.
Union leaders say such reforms "penalize public employees" for government's failure to properly fund the pension plans, adding that employees have paid their fair share while the state and city have skirted their responsibilities. There are also questions surrounding the constitutionality of reducing benefits outlined in contractual collective bargaining agreements.
President of the Chicago Federation of Labor Jorge Ramirez released the following statement in response to Emanuel's proposal, noting the city government's failure to take accountability for their role in the pension problem:
Chicago’s working men and women are disappointed in Mayor Emanuel’s push to penalize public employees for the city’s long-standing failure to adequately fund their various pension funds.
Chicago’s public employees have made every contribution into their retirement plans that has been required of them; the same cannot be said for the city. While the mayor did not create this problem, he allowed it to worsen by failing to make payments as leaders did before him.
Unlike state leaders who have acknowledged their failure to meet their contractual obligations, the city makes no such admission. Despite saying that city workers are not to blame, Mayor Emanuel’s proposal would punish them by forcing them to work longer before retiring, make higher contributions and potentially receive less in retirement benefits.
The mayor’s ‘roadmap’ does little to accept responsibility for the current problem and his threats to pit the public against city workers are harmful to the spirit of cooperation and trust we’ve worked to achieve. Mayor Emanuel is breaking one of his biggest promises he made to labor, that he would sit down with unions representing city workers to discuss any proposed changes to the pension system, prior to making his proposals public.
We urge Mayor Emanuel to engage in talks before pushing a proposal that punishes a city workforce that has time and again sought to be a strategic partner in moving Chicago forward.
During his testimony, the Chicago mayor made doomsday predictions for the city's future if reforms aren't made, stating that pensions would make up 22 percent of the city budget within three years under the status quo, property taxes could soon jump by 150 percent, and city public schools would see average classroom sizes of 55 students.
“Without pension reform, we’ll be forced to mortgage our children’s future to pay for our past,” he warned.
But AFSCME Council 31 officials say Emanuel painted a "distorted picture" of the state's pension problems. Executive Director Henry Bayer released the following statement in response to the Chicago mayor's proposal:
It’s disappointing that in discussing Chicago’s pension funding challenges, Mayor Emanuel presented a distorted picture and left out important facts. Teachers, librarians, firefighters and other city employees earn modest pensions.
The average pension for retirees in the Municipal Fund, which includes most AFSCME-represented employees, is just $31,000 a year. And that modest amount is all they have in retirement, because unlike every private citizen, city employees don’t receive Social Security.
City employees have contributed faithfully toward their pension, at least 8 percent from every paycheck. It was past City administrations that failed to make the necessary contributions to keep the funds solvent. Their negligence combined with the 2008 financial crisis to cause the pension debt that confronts us today.
Mayor Emanuel is wrong to propose that city employees and retirees should now be forced to bear the lion’s share of the burden for fixing a system damaged by shortsighted politicians and reckless Wall Street speculators.
The mayor’s “roadmap” actually points the way to economic insecurity for retired public servants. It would significantly reduce benefits and increase costs to employees. While every Social Security beneficiary receives periodic cost-of living adjustments, the mayor’s plan would completely eliminate any such adjustments for city retirees for the next decade. This approach is unfair to retirees and it is a violation of the state’s constitution, guaranteed to trigger costly litigation.
The unions representing city employees have repeatedly conveyed to the mayor our willingness to work constructively to solve the pension funding problem. Yet he has never once met with us to hear our views or put forward the suggestions he unveiled today.
No one has a bigger interest in assuring the fiscal stability of city pension funds than the retirees and employees who depend upon them. Our union remains committed to working toward a solution that is fair and constitutional, but we need an administration that shares our commitment to a collaborative process and a genuine solution.
Gov. Pat Quinn is reportedly hoping to get pension reform legislation passed by the end of this month.