City proposes fix for pension bill

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Updated: August 4, 2011 4:20PM

Amid strong opposition from the police union, the Daley administration urged the Illinois General Assembly on Friday to soften the blow of a bill that would choke Chicago homeowners and businesses with a $550 million property tax increase in 2015 to solve the city’s pension crisis.

City Hall wants 50 years to get the police and fire pension funds to a point where they have assets to cover 80 percent of their outstanding liabilities.

Currently, the new law gives the city 30 years to get to a 90 percent funding ratio.

But, the most controversial change the city wants to make is a mandatory increase in employee contributions, an issue that has taken center stage in the race for mayor.

It would require Chicago Police officers who now contribute nine percent of their paychecks to pensions to pay 12 percent, with the increase being phased in over a three-year period beginning in 2015.

Firefighters who now pay 9.125 percent would end up contributing 12.125 percent.

“The city’s proposed legislation will provide $240 million in relief to Chicago taxpayers in 2015, but will still require a contribution of $310 million more than the previous year,” Chief Financial Officer Gene Saffold told a City Hall news conference.

“We must look at all three legs of the pension stool — employee and employer contributions, investments returns and benefit payouts — to ensure they are in balance and healthy enough to sustain the pension system.”

Fraternal Order of Police President Mark Donahue said he would accept a legislative fix “that alleviates the pressure on the city” to make pension contributions.

But, Donahue argued that any increase in employee contributions “needs to be negotiated with the union” — and the appropriate time to do that is “during contract negotiations.” That won’t happen for at least another year.

“There is a constitutional impediment to the city demanding an increase in contributions without an increase in benefits,” Donahue said.

He added, “The city hasn’t justified the need for an increase that large so far. And we would not re-open the contract to address this issue.”

Tom Ryan, president of the Chicago Firefighters Union Local 2, said he expected the city to seek “some kind of increase” in employee contributions.

“These funding problems did not happen overnight. They’ve been around for many years. It wasn’t until the economic free-fall that they came to the forefront. We have to find solutions together to make sure promises made to our members are kept,” he said, awaiting details before saying whether or not Local 2 would oppose the bill.

Last month, the Illinois House and Senate approved a bill that amounted to a trade-off between police and fire unions determined to restore their pension funds to fiscal health and local governments desperate to reduce their pension costs.

Chicago and other municipalities won a two-tier pension system that would force newly-hired police officers and firefighters to wait until age 55, instead of 50 to retire with full benefits. They would also get reduced cost of living increases and face caps in the final salary upon which pensions are based.

In exchange for those givebacks, the unions got a pledge that their pensions funds would be 90 percent funded by 2041. Chicago’s Laborers, Municipal Employees, Police and Firefighters pension funds now have assets to cover just 42 percent of their future liabilities.

Daley urged Gov. Quinn to fix the bill before signing it into law. The lame-duck mayor’s plea fell on deaf ears.

“This is the highest real estate tax increase in the history of Chicago and that’s only for fire and police. If you put the other unions in there, it’s about $1.2 billion in one year. ... This will really hit the people. How are you gonna sell your home even if you’re retired? Who would want to buy your home? Buyer beware,” the mayor has warned.