Emanuel begins formidable job of trying to sell pension plan
BY FRAN SPIELMAN AND LAUREN FITZPATRICK Staff Reporters April 1, 2014 4:25PM
Chicago Mayor Rahm Emanuel | Sun-Times file photo
Updated: May 3, 2014 6:33AM
Mayor Rahm Emanuel on Tuesday began the formidable task of trying to sell his share-the-pain plan to raise property taxes by $250 million — and increase employee contributions by 29 percent — to shore up two of Chicago’s four employee pension funds.
It won’t be easy. Chicago aldermen who must approve the plan for five straight years of $50 million property tax increases were running for cover less then a year before the aldermanic election.
Police, fire and teachers unions whose pension funds are also in danger of going broke are working against the agreement and vowing never to agree to anything close to those terms.
And none of the union leaders who signed onto the deal have stepped forward to lead the charge for it.
That’s apparently why Emanuel was in full spin mode Tuesday when asked why raising employee contributions from 8.5 to 11 percent would be legal under a state constitution that states pension benefits “shall not be diminished or impaired.”
“Nobody’s benefit gets cut. It continues to grow. It just doesn’t grow at the pace that it once did. . . . If you compare it to the old thing, you’d say it grows less fast. But, it actually continues to grow,” the mayor said.
“I’ll tell you what a cut looks like — not getting a retirement check. That’s a cut. This guarantees you have a pension. Guaranteeing you have a pension versus one that actually disappears. That’s a cut,” Emanuel said.
As for the bitter pill that he’s asking homeowners to swallow, the mayor essentially argued that it could have been worse without pension reform.
“Compare this to a 150 percent property tax [hike] — the largest in the history of the city, which I oppose — or massive service cuts and massive layoffs on the other side, which I oppose. . . . The other [option] I have is to leave it on course and allow it to go belly up. Those are the three options that I think are unacceptable,” he said.
Bill Dougherty, acting president of the Fraternal Order of Police, scoffed at Emanuel’s argument that asking an employee earning $60,000 annually to contribute $300 more-a-year, forfeit three years of years of cost-of-living increases and give up compounded COLA increases altogether was somehow not a cut in benefits.
“I would never agree to something like this. The Lodge has always been willing to sit down and solve problems with the city. But, if the mayor’s only idea is diminishing our pensions and kicking the can down the road, we are not interested,” Dougherty said.
“It’s totally against the state constitution. Your benefits cannot be diminished," Dougherty said. "There was something passed for state employees. That’s already being challenged. The mayor is rushing to get something done before that challenge comes through because he knows it’s gonna be declared unconstitutional.”
Next year, Chicago is required by state law to make a $600 million contribution to stabilize police and fire pension funds that have now have assets to cover just 30.5 percent and 25 percent of their respective liabilities.
The mayor wants the General Assembly to put off the balloon payment until 2023 to lift the sword hanging over the heads of Chicago taxpayers, but Dougherty said no dice.
“Our members have put in their required contribution since the day they came on the job. It’s the city that refused to follow their own actuarial study that says the city needs to contribute more. The bill fixes that. It forces them to contribute the funding properly. It’s not in one lump. That’s a myth [Emanuel] put out there. It begins in 2015 but they have until 2040 to get the fund to 90 percent,” he said.
The Chicago Teachers Union isn’t buying the pension deal, either. They’re calling it a “draconian cut” that will hurt its lowest-paid staffers in the Municipal Employees pension fund without solving the fundamental revenue problem.
“These people are our lunch ladies. These people are our janitors. These people are our teachers’ aides. These people live overwhelmingly on the South and West Sides of this city. This is a terrible deal for these people, and we intend to fight it with every fiber of our union,” said Stacy Davis Gates, CTU political director.
CTU Vice President Jesse Sharkey argued that, over a 20-year period, the mayor’s proposed cuts would siphon fully one-third of the value of a pension. That means a worker who retired today with a $33,000 pension would have only about $22,000 in actual purchasing power in 20 years after adjusting for an average 3 percent inflation, Sharkey said.
“This amounts to balancing the city’s budget on the backs of some of the poorest people in this city who are least able to afford these kind of attacks,” Sharkey said. “If the Mayor wants to make real pension reform, he needs to talk more honestly about more creative ways of finding revenue and not just taxing homeowners.”
Christine Boardman, president of the Service Employees International Union (SEIU) Local 73, said she supports the “basic constructs” of the pension deal that impacts 10,000 of her members.
“We’re in support of the increase in employee contributions. We’re in support of the Emanuel plan to try to fund it through property tax increases. The bill is going to pass. I know that. You know that,” she said.
“We’re not gonna work against the bill. We’ve told that to Speaker [Mike] Madigan. We’re gonna be neutral, only because of the effect it has on retirees.”
Chicago aldermen don't relish the idea of running for re-election on a platform of raising property taxes by $250 million. That's apparently why they cringed and mostly ran for cover Tuesday when asked whether they were prepared to support the mayor’s plan.
One of the only exceptions was Ald. Carrie Austin (34th), outspoken chairman of the City Council’s Budget Committee.
“That’s a bitter pill. I can’t say that it isn’t — even as a homeowner myself. But if we don’t do something responsible, I don’t want to say we’ll be like Detroit. But, we’ll be in terrible shape. [And] it would not be fair to our employees,” Austin said.
“Sometimes, responsibility hurts. This is what we should do to be a responsible Council — not duck from our responsibility because it’s more than heavy lifting. It’s back-breaking.”