City unions brace for panel’s report on retiree health-care crisis
BY FRAN SPIELMAN City Hall Reporter firstname.lastname@example.org January 10, 2013 12:24AM
Tom Ryan, president of the Chicago Firefighters Union Local 2 | Brian Jackson~Sun-Times files
Updated: February 11, 2013 7:37AM
Union leaders are bracing for an explosive new report on Chicago’s $800 million retiree health-care crisis that could set the stage for higher contributions from 35,000 retirees, reduced benefits or a lethal mix of the two.
On Friday, a retiree health-care commission appointed by former Mayor Richard M. Daley and overhauled by Mayor Rahm Emanuel will deliver its long-awaited report, less than six months before a 10-year settlement agreement that calls for the city to share costs with retirees is due to expire.
Union leaders already have accused the mayor of stalling negotiations on three pivotal issues — a new contract, retiree health care and the city’s pension crisis — by cutting off negotiations that, they claim, were “90 percent done.”
Now, they fear Emanuel will use the threat of retiree benefit cuts and increased contributions as leverage to achieve pension reforms that could include a 10-year freeze in cost-of-living increases for retirees; a five-year increase in the retirement age; a 5 percent increase in employee contributions, and a two-tiered pension system for new and old employees.
City Comptroller Amer Ahmad said Wednesday he has seen a draft of the report, but he refused to comment on it.
Other sources said the commission is expected to give Emanuel a series of cost-cutting options driven not by what’s best for the city’s 35,000 retirees, but by what he believes the city can afford.
“For example, if the city wants to save $30 million, it should increase contributions of retirees. If the city wants to save $60 million, it should increase retiree contributions and provide a plan with less benefits,” said a source familiar with the report.
“If the mayor thinks people will support him in this, he is nuts. . . . If he tries to increase costs and cut benefits to these retirees, they will sue, the city will settle and we’ll be right where we have been for 30 years.”
Tom Ryan, president of the Chicago Firefighters Union Local 2, said he was willing to go to the wall to protect retirees.
“It would be difficult for them to absorb any increases.They retired on a fixed income. They planned their lives on what they were promised when they left. You’re gonna be hitting the most vulnerable people at the most vulnerable time of their lives,” Ryan said. “We [also] don’t want to see any reduction in benefits. They are suffering from illnesses and injuries they incurred while serving the citizens of Chicago. They deserve to be taken care of now that they’ve done their time.”
The Chicago Sun-Times reported in late November that thousands of retired city employees were being warned by the Municipal Employees Annuity and Benefit Fund to brace for a costly change to their city-subsidized health-care plan — or no city subsidy at all.
Emanuel responded by saying he was not about to walk away and leave 35,000 retirees without city-subsidized health care. But he argued that changes must be made to control skyrocketing health-care costs.
The mayor noted that his threat to raise monthly health insurance premiums for active employees by $50 has led to overwhelming participation in a wellness program to manage chronic health problems, saving “north of $100 million.”
Although retirees are a more difficult population to control because they are older, more sedentary and more sickly, Emanuel argued that they are not immune from cost controls.
“We’re gonna make sure people have health care. But there’s a lot of options available to do it and do it in a cost-effective way where the taxpayers are protected as much as the people who are relying on the health care,” Emanuel said then.
“I asked the . . . blue-ribbon committee to . . . look at all options available of how to do it responsibly, but to get costs under control. . . . What we did at the city budget is the lesson to be drawn as we look to the retirees. . . . The taxpayers are not paying something that’s growing at 10 percent a year because their paychecks are not growing at 10 percent a year.”
The pension and retiree health-care crises are inextricably linked, because underfunded city pension funds now contribute 13 percent to retiree health care. Chicago taxpayers contribute 55 percent and retirees pay 32 percent.
Retiree health care represents an $800 million unfunded liability for the city.
Clinton Krislov, an attorney representing retirees in the marathon case, said Wednesday that he expects the commission to recommend cost-cutting options that somehow navigate four different groups of retirees who stopped working on different dates.
Krislov has said he is prepared to seek a court injunction preventing the city from “diminishing or impairing” health benefits for the oldest group of retirees.
Civic Federation Laurence Msall refused to speculate on the commission report.
In the past, he has argued that the city could “walk away” from its health-care obligation to retirees because there is “no state constitutional requirement” the city provide it.
“If they decide to continue it, they have to find a lot of money the city doesn’t have,” Msall told the Sun-Times in November. “It is very hard to see how current city retirees will not be forced to pay significantly more — if they even have the benefit. In the private sector, those companies that offer retiree health care generally require that retirees pay 100 percent of the premium cost.”