Thorner: Baby steps in Chicago Park District pension reform, where’s the deal?

November 9, 2013


Th-24By Nancy Thorner – 

The morning after Illinois lawmakers met for the final week of their fall veto session, Friday, Nov. 8th, a short report on ABC news stated how Chicago was on the road to becoming another Detroit due to its unfunded pension liability of $100 billion.

Senate President, John Cullerton, would disagree with this assessment. As stated on October 23rd by Cullerton, the state’s staggering $100 billion unfunded pension liability is not a “crisis.”

Perhaps Cullerton isn’t aware of the 2013 Alec-Laffer State Economic Competitiveness report (Rich States Poor States) that places Illinois 47th out of 50 states in Economic Performance and 48th out of 50 states in Economic Outlook.

As if Illinois’ $100 billion pension liability wasn’t enough to make this prediction more of a happening rather than just a mere warning, consider also that by the end of the year Illinois will have a stack of $9 billion in unpaid bills, the state is the least creditworthy state in the nation given its 13 credit rating dips, and the average household in Illinois will be on the hook for $42,000 in pension debt.

With the worst-funded pension system in the nation ($100 billion and rising), with only 39 cents in assets for every $1 of obligations, and with pension reform growing the debt daily by $5 million, it is without doubt that Illinois’ skyrocketing pension costs are squeezing out core services like education,public safety and healthcare.

Tribune editorial on Tuesday, November 5, rightly asked this question, “Where’s pension Fix?”  The Illinois Teacher Retirement Fund (one of five pension funds and the one with the biggest pension liability) had investment gains of 12.8% for this fiscal hear that ended on June 30, but unfunded liabilities still rose by $3.6 billion — $55.7 billion from $52.1 billion — proving that even in a good investment year the TRS pension liability got worse.

The thrust of the final sentence of the Tribune’s November 5th editorial remained unchanged from when the veto session opened on November 5th to its adjournment on Thursday, November 7:  Lawmakers, you keep telling us you’re close to a fix. And yet, here we are.

 The pension reform enacted in the House — applicable only to the Chicago Park District — was nothing to brag about in light of Illinois’ $100 billion pension morass.  Even so some House Republicans considered the House pension action  a piece of good news, showing as it did a House capable of taking a small step toward repairing some of the pension crisis.

According to Jeanne Ives (R-42nd) during a recent email exchange, of important is that Democrats were finally admitting there is a problem.  Then too the bill represented a small step toward fixing this state’s monumental and unsustainable pension debt, something the left side of the aisle has fought against for too long.  Ives does remain adamant in calling for comprehensive and major pension reform to return Illinois to solvency.  Ives likewise assured me that *HB 3303 has not been abandoned in the House.

HB 3303, an Illinois Policy Institute-backed comprehensive pension reform package, was introduced by Rep. Tom Morrison (R-54th) in March of this year.  Jeanne Ives was its co-sponsor.  The bill charts a sensible way to fix Illinois’ pension crisis by getting state politicians out of the pension business and moving them to a private sector-modeled 401 (k)-style retirement plan for all future work.

This question remains: Does the majority party really accept the premise that a problem exists and needs to be solved?  The park district pension is a local pension system, not a state pension system.  As such state money is not involved as with the underwater five state pension funds for teachers, state employees, university workers, General Assembly retirees and judges which together make up the $100 billion in pension liability.  The park district pension liability was addressed when the people responsible for the operation of the Chicago Park District pension fund came to the General Assembly with a plan to restore fiscal solvency.

Ted Dabrowski, Vice President of Policy, had this to say about the Chicago Park District pension bill that requires taxpayers to pay an additional $75 million into the Chicago Park District pension.  “With more than $1.4 billion in official debt, The bill fails to adequately reform the Chicago Park District’s pension system, nor does it fundamentally change the way the pension system is run.”

Some reasons why the General Assembly bill is bad for both taxpayers and workers:

  • Tax and fee hikes for city residents:  Although taxpayers are required to pay an additional $75 million into the Chicago Park District’s pension fund, the annual taxpayer contribution to the fund will also triple under this new legislation.
  • Forces workers to keep paying into a broken system:  Chicago Park District workers will eventually be forced to pay 12% of their paychecks into the system, up from 9%.
  • Keeps retirement age too low:  Private sector workers do not qualify for full Social Security benefits until age 67; the retirement age for the majority of Chicago Park District workers under the bill, would be 58.  Any pension reform  must match the government retirement age to the private sector retirement ago to fix the system.

Mayor Rahm Emanuel has voiced his approval of the bill, commenting that the legislation “delivers an honest solution to a problem that has been decades in the making.”  Emanuel went on to say:

This legislation reflects a balanced approach of reform and revenue, giving employees, retirees, and taxpayers the security and certainty they deserve, but that has long been missing.  Taxpayers can feel confident in a long term play that does not relay on them to shoulder the burden alone.

But can taxpayers really feel confident when their share of pension contributions will jump to almost triple to that of employees by 2019?  Additionally, taxpayers will be making “supplemental” payment of $12.5 million in both 2015 and 2016.  By 2019 the payment will jump to $50 million.

Mayor Emanuel likewise expressed hope that the Chicago Park District pension plan will serve as a template for other larger city pension system.  But not so fast say others, including the president of the Chicago Fraternal Order of P0lice and the Chicago Fire Fighters Union.  For just as healthcare is not one size fits all, so it is with pension reform. Sure to be questioned is the constitutionality of reducing benefits to public pension.

Where is the pension fix?  Illinois lawmakers clearly left Springfield on Thursday, November 7, without a fix to the state’s $100 billion public worker pension debt.  Also missing was a clear time frame for reaching an agreement to rein in the worst-funded retirement system in this nation.

The knowledge that every day without pension reform grows the debt by $5 million should be reason enough for legislators to face thegargantuan pension issue with proposals that would tackle the problem, such as would be possible under HB 3303 supported by Republicans representative, Tom Morrison and Jeanne Ives.

As it is, Democrats who hold majorities in both state houses remain wary to cut pension benefits too deeply because of their deep-pocketed, unionized government workers who faithfully support Democrat candidates with votes and money.

Then too, because the $5 million a day debt increase doesn’t directly affect their own pocketbook, but in the final analysis hits the pocketbooks of Illinois taxpayers, the pressure for Democrats not to act is more intense than the pressure to act.

Saturday, November 09, 2013 at 10:00 AM | Permalink

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