like the state of Illinois -- does not fund its employee pensions at their true
cost level (as determined by actuaries). If it did, the city would have to
provide an additional $700 million or so in funding in 2012. By 2015 the number
could grow to about $800 million. Not funding these costs as they are incurred
simply shifts the liabilities to the future.
workers can retire at age 50 with full pensions. But last week, the Illinois
legislature passed a bill to bring pension reform to policemen and firemen
hired after Jan. 1. They would have to work until they are 55 to receive full
Mayor Richard Daley objected
to a provision of the bill that would require funding at the actuarial level by
2015. But the costs in either case are being incurred this year, next year, the
year after ....
if Chicago doesn't fund these costs, who will? Taxpayers elsewhere in the
state, in communities with their own underfunded pensions plans?
Civic Committee of the Commercial Club of Chicago just completed a study of
pensions received by Chicago employees who retired this year after full careers
with the city government. (You can find the study at IllinoisIsBroke.com.)
on the retired firefighters list: A 50-year-old firefighter is receiving a
pension with a lifetime value of $1,037,085. Down the page you come to an
emergency medical technician battalion chief who retired at 53. His pension is
worth $2,181,832. Keep reading. There's a deputy fire commissioner who retired
at 57. His pension is worth $2,746,769. The average fire department retiree's
pension value on the list is $1,318,052.
consider the police retirees. The third one on the list retired at 50 with 25
years of service. His pension is worth $1,072,903. Down the page is a
lieutenant, 51, with a pension value of $1,487,527. A captain has one worth
$2,464,630. Average: $1,236,186.
at the laborers. First on the list is a chief mason inspector who retired at
50. His pension value is $1,985,051. Next is a laborer who retired at 50 with a
pension value of $1,265,984. The next 50-year-old laborer gets $1,400,165.
Average for the group: $1,411,610.
how about the municipal employees? The first is a deputy commissioner who
retired at 50; his pension value is $2,664,526. A senior library clerk who
retired at 50 gets a pension valued at $1,027,984.
on it goes, making these pensions very costly for taxpayers. These 50ish
retirees can -- and many do -- get another job, and earn more retirement
is one reason why Chicago has unfunded pension liabilities approaching $15
billion. This is an enormous problem our next mayor will have to tackle. How
will he or she do it without pension reform? How will union leaders explain it
to their members when the funds run out of money?
city's pension fund in the worst shape -- the firefighters' fund -- is projected
to run out of money as early as 2019. And neither the state nor Chicago is a
guarantor of that obligation.
has its own problems: unfunded pension liabilities at $80 billion or more,
growing at 81/2 percent each year. (There's a nice irony in the fact that
Illinois is requiring Chicago to fund its true pension costs when the state
doesn't fund its own.)
liabilities are one reason why some legislators want Illinois to borrow $4
billion -- which would have to be repaid, with interest -- in order to partially
fund its own pension costs. It is also why some legislators would like to raise
taxes -- in order to keep these costly pension plans in place for the next 30
years or so.
better idea: reform the pensions, which will reduce their costs, and fund them
according to actuarial standards. Such reforms can be done in a way that fully
protects retirees as well as the benefits current workers have already earned.
Companies in the private sector have been compelled to make these changes.
Illinois and Chicago should do so as well.
was once said that democracy is about government of the people, by the people,
and for the people. This means we should not continue to extend costly retirement
benefits to public employees that ordinary taxpayers cannot obtain for
R. Eden Martin is
president of the Civic Committee of the Commercial Club of Chicago.