There is plenty of blame to go around for the city’s pension woes, starting with the administration of Mayor Richard M. Daley. | Sun-Times library
Updated: November 3, 2012 6:23AM
From the reaction of Chicago aldermen Monday, you would have thought most of them had only just learned for the first time about the city’s looming pension crisis.
Worse yet, you would have thought the City Council had no role whatsoever in putting city employees, retirees and taxpayers in this current predicament, which promises a measure of pain for everyone.
And worst of all, I’m not sure many of the aldermen yet realize the role they could and should play in structuring a solution, beyond just covering Mayor Rahm Emanuel’s backside in any coming negotiations with Springfield.
Sharing my incredulity was Civic Federation President Lawrence Msall, who has been sounding the pension alarm throughout his 10 years on the job.
“They are acting like they are the victims of this,” Msall said after listening patiently during a committee hearing in which aldermen flailed about in search of someone else to blame for unfunded pension liabilities that could force a $1.5 billion tax increase in 2016 if something isn’t done.
“It’s very disappointing to hear Chicago aldermen show surprise on the financial condition of the pension systems, especially in light of the fact the Civic Federation and other organizations have been out there for years with warnings,” Msall said.
Msall called it a positive sign that Ald. Patrick O’Connor scheduled the special hearing of the council’s Workforce Development & Audit committee to better inform aldermen about the scope of the pension problem and that aldermen were “beginning to ask good questions.”
“What we’re not hearing is any of the aldermen offering any recommendations for how they could fix this,” he added. “They’re asking the people who administer the pension funds what they’re willing to sacrifice instead of saying what the aldermen are willing to do.”
Believe me. There is plenty of blame to go around, starting with the administration of Mayor Richard M. Daley, which put off dealing with all its financial problems including this one while praying for a miracle economic turnaround to postpone the day of reckoning.
But it was shocking to hear one alderman after another acting as if this was coming at them out of nowhere instead of a slow-moving freight train gradually bearing down on them for years and now plainly in sight.
Admittedly, many of the aldermen are new and not responsible for the city’s past mistakes, although there was little to show that any of them have been educating themselves about the pension problem since the mayor first proposed his five-point Roadmap to Retirement Security in May.
That proposal calls for a 10-year halt to the 3 percent cost-of-living increases for city retirees, higher employee contributions and an increase in the retirement age. The mayor’s proposal did not indicate how much money the city would be willing to spend to close the gap that would remain, nor where he would find it.
Aldermen directed most of their angst toward the administrators of the city’s pension funds who came to testify, along with legislative leaders and Gov. Pat Quinn.
Indeed, city pensions are governed by state law, and any solution will need to go through the General Assembly, which also needs to fix the state’s own long-ignored pension-funding problems.
Yet there was no recognition by the aldermen that both the retirement benefits and funding formulas for city pensions that are the crux of the problem have been the result of collaboration between past mayoral administrations and union leaders and that the City Council gives its tacit approval to those deals every year by approving budgets that sent us inexorably to this point.
“This is a numbers problem,” Msall said. “There’s nothing politically easy that faces the city of Chicago. They’re going to need to reduce benefits, to reduce the unfunded liability, but even then, they’re still going to need to raise additional revenue. This has been a disaster that’s been slowly evolving by maintaining pension programs that we’re not funding according to what the experts tell us they cost.”
The pension problem is coming to a head now because of a provision won in 2010 by the pension funds for Chicago police and firefighters as a tradeoff for their agreeing to an increased retirement age.
That provision requires the city to fully fund those two pension funds beginning in 2016, which could require a tax increase of at least $600 million in the 2015 city budget, lacking other changes.
If aldermen have their own ideas, beyond further delays in facing the music, this would be the time to step forward.