Cash-strapped Chicago is crafting a plan to chip away at its $35.8 billion pension crisis that is likely to offer city employees the option of buying out a portion of their future pension benefits in exchange for a lump-sum payment upfront.<\/p>\n
Acting Chief Financial Officer Steve Mahr said Thursday he expects the so-called \u201cD.R.O.P or deferred retirement option\u201d to be one of \u201croughly a dozen or more ideas\u201d that will \u201cset the city\u2019s agenda\u201d for the next decade.<\/p>\n
The pension commission that Mayor Brandon Johnson created shortly after taking office disbanded without releasing a single report after Gov. JB Pritzker signed a police pension sweetener that, over time, will make Chicago\u2019s pension crisis $11 billion worse.<\/p>\n
Now, the Johnson administration has asked EY, the consulting firm that recommended $1.4 billion in savings and revenue-generation options for the city to consider, to start climbing the mountain of unfunded pension debt.<\/p>\n
Deferred retirement options are already offered at the state level and in municipal pension funds across the country.<\/p>\n
It could be made available to Chicago\u2019s 33,432 employees, only if state lawmakers agree to authorize it. A bill sponsored by state Sen. Robert Martwick (D-Chicago) would do just that and earlier this month advanced out of a Senate committee.<\/p>\n
Those types of payouts are now allowed for state retirees, and Martwick said it has reduced Illinois\u2019 pension obligations by approximately $2 billion.<\/p>\n
Former Mayor Rahm Emanuel proposed a $10 billion pension obligation bond for the city to ease the pain of post-election tax increases by \u201cas much as $200 million\u201d in his successor\u2019s first budget.<\/p>\n
But, Emanuel\u2019s ordinance setting up the structure for pension borrowing never got a City Council hearing, let alone a vote.<\/p>\n
Mahr did not specifically mention pension obligation bonds as one of the ideas being considered. But, he appeared to be alluding to it when he talked about introducing \u201cconcepts that people have heard before, but framing them in a different light.\u201d<\/p>\n
\u201cWe are very, very focused on developing a foundation that will steady our credit ratings and truly provide a set of ideas that will make it easier for future generations to make tough decision because that\u2019s what we\u2019re dealing with; tough decisions, tough trade-offs between current and future taxpayers,\u201d he said.<\/p>\n
Fraternal Order of Police President John Catanzara said the deferred retirement option \u201cwould probably be beneficial for terminally ill people who will never see 20 years of pension checks [and say], `Give me my money now. Let me take care of my family.\u2019\u201d<\/p>\n
But, those officers will be the \u201cexception\u2014not the norm,\u201d he said.<\/p>\n
\u201cWe have officers who have some gambling and other issues who would possibly take advantage of it to their own detriment. People who are irresponsible with money and everything else take all of their money upfront, have nothing to live on and then what? The city doesn\u2019t care about them at that point. They\u2019re off the hook,\u201d Catanzara said.<\/p>\n
Pat Cleary, president of the Chicago Firefighters Union Local 2, doesn\u2019t mind the idea, so long as it remains optional.<\/p>\n
\u201cYou\u2019re going to be penalized a little bit. You\u2019re not going to get the pension that you would have gotten. But, you\u2019re getting all of the money upfront,\u201d Cleary said.<\/p>\n
\u201cIf you don\u2019t think you\u2019re going to live very long, you take the lump-sum upfront, you\u2019re going to get more than you would have gotten than if you pass away five years after retirement,\u201d Cleary said.<\/p>\n
Dana Levenson, who spent three years as Chicago\u2019s chief financial officer under former Mayor Richard M. Daley, said pension obligation bonds and deferred retirement options are \u201cnot bad ideas.\u201d <\/p>\n
But even if Chicago did both of those things, the pension crisis would be only marginally improved.<\/p>\n
Three of the four city employee pension funds have assets to cover less than 25 percent of future liabilities.<\/p>\n
\u201cThe funding level continues to go down. The march down to zero continues for the pension funds,\u201d Levenson said. \u201cThere\u2019s so much more that needs to be done.<\/p>\n
\u201cThere should be a constitutional convention [that] discusses the state of Chicago\u2019s pensions. That\u2019s when you start getting into the benefits question,\u201d he said.<\/p>\n
Emanuel learned that the hard way. He spent the first of his two terms trying to negotiate pension reforms that were ultimately overturned. The state Supreme Court upheld a pension protection clause that says those benefits \u201cshall not be impaired or diminished.\u201d<\/p>\n
Catanzara acknowledged that the benefits question must be confronted.<\/p>\n
\u201cWe\u2019re open to conversations about higher contributions by our members in the future for new hires because we understand it is more likely going to be a discussion that is forced upon us at some point,\u201d he said.<\/p>\n
\u201cBut the give on the city\u2019s part is going to be contract concessions\u2026that they refuse to even discuss. They want their cake and [to] eat it too,\u201d he said.<\/p>\n","protected":false},"excerpt":{"rendered":"Cash-strapped Chicago is crafting a plan to chip away at its $35.8 billion pension crisis that is likely…\n","protected":false},"author":2,"featured_media":563130,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[45,49,48,133,131,132],"class_list":["post-563129","post","type-post","status-publish","format-standard","has-post-thumbnail","category-personal-finance","tag-business","tag-ca","tag-canada","tag-finance","tag-personal-finance","tag-personalfinance"],"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/563129","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/comments?post=563129"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/posts\/563129\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media\/563130"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/media?parent=563129"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/categories?post=563129"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/ca\/wp-json\/wp\/v2\/tags?post=563129"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}