WBEZ | Illinois pensions http://www.wbez.org/tags/illinois-pensions Latest from WBEZ Chicago Public Radio en Madigan drops property tax mandate in pension bill http://www.wbez.org/news/madigan-drops-property-tax-mandate-pension-bill-109983 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/Pat-Quinn-AP-Seth-Perlman.jpg" alt="" /><p><p>Illinois House Speaker Michael Madigan is removing a controversial provision from a Chicago pension bill that would have required the City Council to raise property taxes in order ease the city&rsquo;s nearly $20 billion pension crisis.</p><p>The move to strip the property-tax language in the bill came late Monday, just a few hours after Gov. Pat Quinn signalled he would not back a proposed property tax hike that Mayor Rahm Emanuel is pushing in order to bolster the ailing pension funds for Chicago laborers and municipal workers.</p><p>&ldquo;Working with legislative leaders, bill sponsors, the Governor, and our partners in labor, we have addressed their concerns and can now move forward to save the retirements of nearly 60,000 city workers and retirees in Chicago,&rdquo; Emanuel was quoted as saying in an emailed statement late Monday afternoon.</p><p>But the removal of the property tax language doesn&rsquo;t mean Emanuel&rsquo;s tax hike proposal is going away. That plan, which would bring the city $750 million in revenue over the next five years, still seems to be central to the mayor&rsquo;s plan to pump more money into the city&rsquo;s pensions.</p><p>The difference is that state legislators, who must approve changes to Illinois pension law, don&rsquo;t have to worry about being blamed for raising Chicago property taxes during an election year. The bill&rsquo;s original language mandated that the City Council raise property taxes to pay for pensions. The latest version allows the city to use &ldquo;any available funds&rdquo; to make its annual payments.</p><p>Speaking at an event Monday morning, Emanuel said he is not trying to hang a potential property tax hike around legislators&rsquo; necks.</p><p>&ldquo;It was never anybody&rsquo;s intention to have Springfield deal with that,&rdquo; Emanuel said. &ldquo;That&rsquo;s our responsibility. But I do believe to actually give the 61,000 retirees and workers the certainty they deserve, you need reform and revenue. And we&rsquo;ll deal with our responsibility.&rdquo;</p><p>Emanuel said he will continue to &ldquo;address people&rsquo;s concerns&rdquo; about the pension plan, though he would not speak directly to its fate in the City Council, which would also need to approve any property tax hike.</p><p>To placate public worker unions who had wanted a dedicated revenue stream, Madigan&rsquo;s changes also beef up the penalties if City Hall wriggles out of paying its pension contributions. The bill directs Illinois&rsquo; Comptroller to cut off state funding to the city indefinitely if it doesn&rsquo;t pay its pension tab, and it gives pension funds the right to sue City Hall in order to get their money.</p><p>The new bill would also guarantee that retirees who make $22,000 or less in annual benefits would get a cost-of-living increase of at least 1 percent each year. Prior proposals set the annual increases at the lesser of 3 percent or half the rate of inflation. Right now, city laborers and municipal workers get a guaranteed annual benefit increase of 3 percent, which builds on the previous years&rsquo; increases.</p><p>The changes to the mayor&rsquo;s proposed pension fix came just hours after Gov. Pat Quinn slammed Emanuel&rsquo;s proposed property tax hike.</p><p>&ldquo;They&rsquo;ve gotta come up with a much better comprehensive approach to deal with this issue,&rdquo; Quinn said at an unrelated press conference. &ldquo;But if they think they&rsquo;re just gonna gouge property taxpayers, no can do. We&rsquo;re not gonna go that way.&rdquo;</p><p>Quinn, a populist Democrat who is seeking re-election in November, has made property tax relief central to his 2015 state budget proposal. And while he shot down Emanuel&rsquo;s proposed property tax hike, the governor did not offer an alternative source of revenue for Chicago pensions.</p><p>&ldquo;I think they need to be a whole lot more creative than I&rsquo;ve seen so far,&rdquo; Quinn said.</p><p>State legislators could consider the new amendment as soon as Tuesday.</p></p> Mon, 07 Apr 2014 15:32:00 -0500 http://www.wbez.org/news/madigan-drops-property-tax-mandate-pension-bill-109983 Quinn quiet on mayor’s pension plan, questions property tax hikes http://www.wbez.org/news/quinn-quiet-mayor%E2%80%99s-pension-plan-questions-property-tax-hikes-109966 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/Quinn - AP Seth Perlman.jpg" alt="" /><p><p>Illinois Democratic Gov. Pat Quinn is raising questions about whether he would support a plan to bolster Chicago&rsquo;s underfunded public pensions by raising property taxes, telling reporters today that property taxes are already &ldquo;overburdening&rdquo; state residents.</p><p>State lawmakers are now debating <a href="http://www.google.com/url?q=http%3A%2F%2Fwww.wbez.org%2Fnews%2Femanuel-pension-deal-would-raise-property-taxes-trim-benefits-109948&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHVMds9AwIwUN5U23ljh0rlrgfAPg">Chicago Mayor Rahm Emanuel&rsquo;s plan</a> to prop up city&rsquo;s pension funds for laborers and municipal workers. Central to that is a proposal to raise property taxes by $50 million each year for five years, which would ultimately net the city $750 million. The mayor also is calling for city workers to chip in more money toward their retirement benefits, and he wants to scale back the rate at which those benefits grow each year.</p><p>But Emanuel&rsquo;s blueprint, which he said would solve about half of Chicago&rsquo;s nearly $20 billion public pension crisis, first needs approval from the state legislature and the governor, because all Illinois pensions are governed by state law.</p><p>Quinn on Thursday would not say whether he would sign the <a href="http://www.google.com/url?q=http%3A%2F%2Fwww.ilga.gov%2Flegislation%2Fbillstatus.asp%3FDocNum%3D1922%26GAID%3D12%26GA%3D98%26DocTypeID%3DSB%26LegID%3D73354%26SessionID%3D85&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHCEIli0kRUcM8Np1l1LxGkpZmWDg">Chicago pension bill</a> if it landed on his desk.</p><p>&ldquo;I don&rsquo;t know what that bill is, frankly,&rdquo; Quinn told reporters in Chicago. &ldquo;I think it has all kinds of different descriptions. They&rsquo;re, I guess, looking at it in Springfield. When they have something put together we&rsquo;ll look at it. But I wanna make it clear: I believe in reducing the burden of property taxes in our state.&rdquo;</p><p>Quinn would not detail any specific concerns he had with Emanuel&rsquo;s pension plan. But he returned repeatedly to the talking points he has been using to push his own 2015 state budget proposal. &ldquo;The bottom line in our state is we have to reduce our reliance on property taxes and we have to invest in education,&rdquo; Quinn said.</p><p>The governor&rsquo;s 2015 budget would make permanent a <a href="http://www.google.com/url?q=http%3A%2F%2Fwww.wbez.org%2Fstory%2Fincome-tax%2Ftemporary-tax-hikes-dont-always-stay-way&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHDXygwYKimhgniQZB0Efijo86f_Q">income tax hike</a> enacted in 2011, while guaranteeing all Illinois homeowners a $500 property tax refund. The governor is hoping that will allow municipalities around the state, boosted by trickle-down state income tax revenue, to lower local property taxes, which Quinn thinks disproportionately favor wealthy areas.</p><p>The mayor&rsquo;s Springfield allies put his plan into legislative form on Tuesday, shortly after he outlined it for reporters. The bill passed a key House pension committee on Wednesday, but is still awaiting a debate before the full House.</p><p>The State Senate, meanwhile, adjourned for the week on Thursday without taking up the plan.</p><p>The blueprint Emanuel outlined earlier this week aims to pump more money into the two pension funds for more than 56,000 city workers -- one for city laborers and the other for municipal workers, including administrators and skilled tradesmen.</p><p>By 2020, Emanuel&rsquo;s plan would finally do away with the <a href="http://www.google.com/url?q=http%3A%2F%2Fwww.wbez.org%2Fnews%2Fexperts-say-chicago-has-public-pension-system-set-fail-109329&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNGzLcw0b8YPzM-h-NQSYombAlYX5g">archaic math</a> the city has been using for decades to calculate how much money to chip into its workers&rsquo; retirements. Experts say that is a primary reason the pension funds have been shorted for decades, leading to their current dire shape. Instead, the proposal in Springfield would slowly ramp up contributions from the city, before switching over to a self-adjusting funding formula.</p><p>If the city tries to skimp on payments -- or skip them altogether -- <a href="http://www.google.com/url?q=http%3A%2F%2Fwww.ilga.gov%2Flegislation%2Ffulltext.asp%3FDocName%3D09800SB1922ham004%26GA%3D98%26SessionId%3D85%26DocTypeId%3DSB%26LegID%3D73354%26DocNum%3D1922%26GAID%3D12%26Session%3D&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNEL9MZWqOZTKPul1CQW64R2_sAHpA">the current proposal</a> allows the pension funds to take Chicago to court, or even garnish City Hall&rsquo;s share of state grant money.</p><p>But the stabilization of the pension funds would also come at a cost for taxpayers and city workers.</p><p>The mayor&rsquo;s proposed property tax hike, which would still need approval from the City Council, would cost the owner of a $250,000 home about $58 more in property taxes each year for the next five years, according to the mayor&rsquo;s office.</p><p>Current and retired city workers would also kick more into their pension funds, but get less out of them. Employee contributions would jump from the current 8.5 percent of each paycheck to 11 percent by 2019.</p><p>But the mayor also wants to scale back the rate at which those benefits grow each year. Retirees in the municipal and laborers pension funds currently see their retirement benefits grow at a 3 percent compounded annual rate. The mayor wants to cut that down to a flat 3 percent, or half the rate of inflation, whichever is smaller. And retirees would see no benefit increase in 2017, 2019 or 2025.</p><p>Several of Chicago&rsquo;s most powerful city workers&rsquo; unions quickly came out against the mayor&rsquo;s plan, arguing it violates a part of the <a href="http://www.google.com/url?q=http%3A%2F%2Fwww.ilga.gov%2Fcommission%2Flrb%2Fcon13.htm&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHYjOR9TNeMJMsYGbhWyAumt2lbbA">Illinois Constitution</a> that says pension benefits &ldquo;shall not be diminished or impaired.&rdquo;</p><p>That includes the unions for police, firefighters and teachers, whose members all have their own woefully underfunded pensions systems that would not be affected by Emanuel&rsquo;s proposal. What&rsquo;s more, the mayor&rsquo;s plan does nothing to stave off a state-mandated spike in the city&rsquo;s contributions to its police and fire pensions next year, which will cost nearly $600 million.</p><p>The jump in required payments was designed to finally bring the city&rsquo;s police and fire pensions into the black, after decades of City Hall shorting the funds. But Emanuel has threatened that such a huge, one-time increase would force drastic budget cuts or steep property tax hikes.</p><p>A spokesman for venture capitalist Bruce Rauner, Quinn&rsquo;s Republican opponent in the November election, said in a statement that Rauner disagreed with the mayor&rsquo;s proposal.</p><p>&ldquo;Bruce has always maintained that true pension reform requires moving towards a defined contribution style system and believes that should also be part of the solution for Chicago,&rdquo; said campaign spokesman Mike Schrimpf.</p><p><em><a href="http://www.google.com/url?q=http%3A%2F%2Fwww.wbez.org%2Fusers%2Fakeefe&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNHCooL3ruU-DUyQdnHprdBP25WItg">Alex Keefe</a> is political reporter at WBEZ. You can follow him on <a href="https://www.google.com/url?q=https%3A%2F%2Ftwitter.com%2FWBEZpolitics&amp;sa=D&amp;sntz=1&amp;usg=AFQjCNE7HeV8c3K0gV2LF_GODmIGo6nkkg">Twitter</a> and <a href="https://plus.google.com/102759794640397640028">Google+</a>.</em></p></p> Thu, 03 Apr 2014 15:40:00 -0500 http://www.wbez.org/news/quinn-quiet-mayor%E2%80%99s-pension-plan-questions-property-tax-hikes-109966 Illinois' pension problem: How big is it, really? http://www.wbez.org/news/illinois-pension-problem-how-big-it-really-109659 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/flickr_matt Turner_springfield.jpg" alt="" /><p><p>The controversial changes to Illinois&rsquo; public pension systems enacted in December came after years of fierce debate. And one of the key points of contention among academics and fund leaders was this fundamental question: Exactly how bad is the pension shortfall?</p><p>The number kicked around by politicians and reporters is usually around $100 billion, based on <a href="http://cgfa.ilga.gov/Upload/1113%20SPECIAL%20PENSION%20BRIEFING.pdf">estimates</a> from the state&rsquo;s five retirement systems.</p><p>That is what is known as the state&rsquo;s &ldquo;unfunded liability&rdquo;&mdash;a fancy way of saying the amount Illinois will owe state workers in future retirement benefits but will not be able to pay if the systems&rsquo; finances do not change.</p><p>But there are economists, including a recent <a href="http://www.chicagomag.com/Chicago-Magazine/December-2013/Q-and-A-with-University-of-Chicago-Economist-Eugene-Fama/">Nobel Prize winner</a>, who thinks the real amount of this pension debt is at least two or three times bigger than that.</p><p>Economists, lawmakers, and pension fund leaders agree that Illinois&rsquo; pension underfunding is a gargantuan problem, no matter what math you use. But the math does matter, they say, because it produces the number they are trying to hit when they determine state contributions or pension reform laws.</p><p>The bigger the number, the more taxpayers and state workers may feel the sting in the form of benefit reductions, tax hikes, or budget cuts.</p><p><strong>A question of risk &amp; optimism</strong></p><p>Jeffrey Brown, a financial economist at the University of Illinois, believes the state&rsquo;s unfunded pension liabilities are more likely around $250 billion.</p><p>He is part of that school of economists who have raised big questions about the way all American public pension funds are crunching their numbers. The result, academics such as Brown claim, is that public pension debt is made to look far smaller than it really is.</p><p>&ldquo;They&rsquo;re being too optimistic because they are failing to account for risk,&rdquo; Brown said.</p><p>At issue are the assumptions that pension funds make about how much money they will earn off of their investments in the future.</p><p>Running a public pension fund is basically like being a fortune teller, with a calculator instead of a crystal ball. Pension fund actuaries try to predict how much of today&rsquo;s dollars they will need in order to pay retirement benefits decades down the road.</p><p>To do that, they also try to predict how much money they are going to make from their investments. The more they assume their investments will grow in the future, the smaller they assume their future pension debt will be.</p><p>The number pension funds use to predict their future financial condition is called a &ldquo;discount rate.&rdquo; Right now, Illinois&rsquo; five state pension funds assume those investments will bring in 7 percent to 8 percent a year. Many pension funds in Illinois have hit or exceeded that mark when returns are averaged over the last 30 years.</p><p>But economists such as Brown <a href="about:blank">argue</a> that assumption is too optimistic, regardless of what happened in the past.</p><p>&ldquo;If I go to Las Vegas, and I bet my house, and I actually win, it doesn&rsquo;t mean that it was a smart thing to go to Las Vegas and gamble my house, because I could have just as easily lost,&rdquo; Brown said.</p><p>Brown said a safer rate of return would be around 4 percent, and some economists have said it should be even lower. But there is a more fundamental issue, he said. Because public pensions, unlike 401(k) plans, are supposed to be guaranteed payments to workers, pension funds should not be using something as unpredictable as investment returns to discount what they will owe.</p><p>&ldquo;Whether you invest the money...in Beanie Babies, or whether you invest it in stocks, or whether you put it under your mattress, doesn&rsquo;t affect how much we owe,&rdquo; Brown said. &ldquo;And the same thing is here. They&rsquo;re really separate decisions.&rdquo;</p><p><strong>The &lsquo;reality&rsquo; of public pensions</strong></p><p>Brown&rsquo;s pitch of new pension math has not gone over well with many pension fund leaders.</p><p>&ldquo;What you&rsquo;ve just described is pure finance theory,&rdquo; said Keith Brainard, director of research at the National Association of State Retirement Administrators, which represents public pension leaders nationwide. &ldquo;However, public pension plans are not operating in a world of theory.&rdquo;</p><p>Brainard has been a <a href="http://www.nasra.org/content.asp?contentid=133">vocal critic</a> of the more conservative math that economists such as Brown are advocating. He points out that the funds&rsquo; financial predictions are not simply based on past investments, but also on what they think will happen in the future with interest rates, inflation, and the performance of a wide range of assets.</p><p>And he sees an agenda behind some financial economists&rsquo; estimates, which would make America&rsquo;s public pension problems seem so bad as to be almost unsolvable, absent huge tax hikes or deep budget cuts.</p><p>&ldquo;It would make the cost of providing that benefit so prohibitive that state legislatures and city councils by and large would be forced to close those pension plans,&rdquo; Brainard said.</p><p>Some economists have <a href="http://suaa.org/assets/pdf/AreStatePublicPensionsSustainable.JD%20Rauh.pdf">predicted</a> that very outcome. Brainard dismissed that notion as a scare tactic, often wielded by groups that believe public pensions are unsustainable, and that workers should be shifted over to 401(k)-style retirement plans.</p><p><strong>Illinois&rsquo; challenging pension math</strong></p><p>State Sen. Daniel Biss, D-Evanston, was one of the architects of the state&rsquo;s new pension law. He said the type of pension math advocated by some financial economists would be particularly hard for Illinois&rsquo; cash-strapped state government.</p><p>Assuming less money from future investments would mean Illinois must kick in more money to pay for pensions -- perhaps too much money, if investment returns exceed the lowered expectations.</p><p>And Biss said Illinois simply cannot afford to be conservative with its math, but rather needs to try to guess its pension obligations right on the nose.</p><p>&ldquo;If we had enough money as a state to - in addition to funding schools and health care and human services and infrastructure - also create a Scrooge McDuck-style vault of coins for the pension systems to play in for no reason, I think that might be a cool tourist attraction,&rdquo; Biss said.</p><p>But not a practical one.</p><p>Still, for financial economists like Brown, this whole debate is about transparency. Brown does not advocate for the abolition of public sector defined benefit plans, but thinks they are not being honest with themselves&mdash;or with taxpayers.</p><p>&ldquo;If you&rsquo;re gonna have those discussions, regardless of where you come down, you need to be working with accurate numbers, &ldquo;Brown said. &ldquo;And you don&rsquo;t want to hide the true cost of things.&rdquo;</p><p><em><a href="http://www.wbez.org/users/akeefe">Alex Keefe</a> is a political reporter at WBEZ. You can follow him on <a href="https://twitter.com/WBEZpolitics">Twitter</a> and <a href="https://plus.google.com/102759794640397640028">Google+</a>.</em></p></p> Fri, 07 Feb 2014 14:00:00 -0600 http://www.wbez.org/news/illinois-pension-problem-how-big-it-really-109659 Morning Shift: The math behind Illinois' pension problem http://www.wbez.org/programs/morning-shift-tony-sarabia/2014-02-07/morning-shift-math-behind-illinois-pension-problem <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/Flickr seanbirm.jpg" alt="" /><p><p>WBEZ&#39;s political reporter Alex Keefe helps explain the numbers behind Illinois&#39; pension problem, and the unique and countrified sounds of Paul Burch.&nbsp;</p><div class="storify"><iframe allowtransparency="true" frameborder="no" height="750" src="//storify.com/WBEZ/morning-shift-the-math-behind-illinois-pension-pro/embed?header=false" width="100%"></iframe><script src="//storify.com/WBEZ/morning-shift-the-math-behind-illinois-pension-pro.js?header=false"></script><noscript>[<a href="//storify.com/WBEZ/morning-shift-the-math-behind-illinois-pension-pro" target="_blank">View the story "Morning Shift: The math behind Illinois' pension problem" on Storify</a>]</noscript></div></p> Fri, 07 Feb 2014 08:37:00 -0600 http://www.wbez.org/programs/morning-shift-tony-sarabia/2014-02-07/morning-shift-math-behind-illinois-pension-problem Experts say Chicago has a public pension system set up to fail http://www.wbez.org/news/experts-say-chicago-has-public-pension-system-set-fail-109329 <p><p>Illinois lawmakers may have approved a fix for the state&rsquo;s pension crisis. But Chicago is still facing a massive spike in required pension payments to help bring its own funds up to speed.</p><p>The city&rsquo;s four pension systems &mdash; for police, firefighters, laborers and municipal workers &mdash; were short by a whopping $19.5 billion at the end of 2012. That does not include the ailing pension fund for Chicago teachers, which has its own $8 billion shortfall at the end of the last fiscal year.</p><p>Increased benefits for city workers, early retirement offers and market downturns put pressure on the city&rsquo;s four pension funds in the late 1990s and early 2000s. But pension experts, labor leaders and politicians also point to a more fundamental problem &mdash; a quirk of state law that experts say may have set the system up to fail.</p><p>Retired Chicago firefighters George Beary, 70, says he wasn&rsquo;t making a lot of money when he started at the fire department back in 1967. But he still remembers the words of consolation he got from one of his officers in the fire academy.</p><p>&ldquo;When we got on the fire department, we were taken care of from the time we walked through those big red doors, to the time they haul your ass outta church to go in the ground,&rdquo; Beary recalled. &ldquo;You&rsquo;re covered. Exact words.&rdquo;</p><p>But for Beary, they don&rsquo;t ring as true today.</p><p>He and a group of fire department retirees - they call themselves &ldquo;oldtimers&rdquo; - sipped coffee and munched on donuts one recent morning at the Chicago Firefighters Local 2 Union hall, on the city&rsquo;s South Side.</p><p>Altogether, Chicago&rsquo;s four pension accounts were just 36 percent funded at the end of 2012. But the one for firefighters and paramedics is the worse off by far.</p><p>For every dollar it owes in benefits, it has just a quarter in the bank.</p><p>&ldquo;See the gray hair? That comes from worry,&quot; said retired Capt. Peter Qualizza.</p><p>He&rsquo;s one of roughly 4,100 beneficiaries in the firefighters&rsquo; pension fund which some experts project could go broke in less than a decade.</p><p>&ldquo;So everyone here has gray hair,&rdquo; Qualizza said, drawing laughs from the other retirees sitting around a long conference table. &ldquo;Some of &lsquo;em color it, some of &lsquo;em don&rsquo;t, okay? But everyone of us has gray hair because we&rsquo;re concerned about the future.&rdquo;</p><p><strong>Chicago&rsquo;s unrealistic pension math</strong></p><p>The roots of Chicago&rsquo;s pension troubles go back decades, long before Qualizza and the other oldtimers starting going gray.</p><p>At issue is the so-called &ldquo;multiplier&rdquo; equation by which City Hall calculates how much money to chip into its pension piggy banks each year. It may sound complex, but the math is simple: City Hall bean-counters take the amount that workers in each fund paid into their pensions from two years prior, then they multiply that by a number that&rsquo;s set in state law.</p><p>As a matter of state law, Chicago&rsquo;s pension math is set by Springfield legislators. But the unique multiplier number for each of the four funds hasn&rsquo;t increased since 1982.</p><p>&ldquo;This is really one-of-a-kind in my experience,&rdquo; said actuary Jeremy Gold, who studies public pensions all over the country. &ldquo;There are no other public pension plans that I am aware of...that pays the way Chicago pays.&rdquo;</p><p>Gold says the fundamental problem is this multiplier doesn&rsquo;t change with the times. That means the money going into each fund stays relatively flat, regardless of whether retirees get richer benefits, stock markets crash or the system is burdened by thousands of early retirements, as it was under former Mayor Richard Daley in 1998 and 2004. (Daley declined WBEZ&rsquo;s interview request.)</p><p>The relatively static funding level is akin to offering to pay your grocer the 1982 price for a gallon of milk.</p><p>A 2010 <a href="http://www.chipabf.org/ChicagoPolicePension/PDF/Financials/pension_commission/CSCP_Final_Report_Vol.1_4.30.2010.pdf">report</a> commissioned by Daley found this inadequate funding was the main reason Chicago&rsquo;s police and fire pension funds have taken a such dive in the 2000s. The report blamed benefit increases for the dire condition of the laborers&rsquo; and municipal workers&rsquo; funds, though the inadequate funding has made it harder for them to recover.</p><p>&ldquo;At this point, after having been in place for 30 years, it no longer bears any relationship to the realistic cost of providing these benefits,&rdquo; Gold said.</p><p><strong>Pension problems that go back decades</strong></p><p>In fact, the problem is much older than that.</p><p>In his downtown office, fire pension fund secretary Tony Martin flips through a massive, shopworn book containing notes from pension board meetings going back more than a century, from 1887 to Dec. 18, 1931.</p><div class="image-insert-image "><a href="http://www.wbez.org/system/files/styles/original_image/llo/insert-images/pension_chart_for_al.jpg" target="_blank"><img alt="" class="image-original_image" src="http://www.wbez.org/system/files/styles/original_image/llo/insert-images/pension_chart_for_al.jpg" style="height: 247px; width: 400px; float: right;" title="Sources: WBEZ analysis of data from the Chicago Firemen’s Annuity and Benefit Fund, Policemen’s Annuity and Benefit Fund, Municipal Employees’ Annuity and Benefit Fund and the Laborers’ Annuity and Benefit Fund" /></a></div><p>Martin finally lands on a<a name="chart"></a> yellowed, typewritten letter the firefighter&rsquo;s pension board sent to state lawmakers on Wednesday, May 4, 1927.</p><p>The letter&#39;s author is complaining about the way Chicago funds its pensions - about a system that&rsquo;s awfully similar to today&rsquo;s multiplier - and the board is asking state lawmakers for relief.</p><p>&ldquo;It&rsquo;s amazing!&rdquo; Martin said. &ldquo;We never really dealt with the structural issues of these pension funds.&rdquo;</p><p>Martin says the stock market boom of the late 1990s only masked those structural issues - especially for police and fire pensions. But he says the chronic underfunding means investment losses hit them even harder during the Dot-com bust and the 2008 recession.</p><p>Now, the pensions are forced to sell off the very assets they&rsquo;re supposed to be investing.</p><p>&ldquo;Basically what&rsquo;s happening is the money that&rsquo;s coming in from firemen today and the money that&rsquo;s coming in from the city today, is going out the door today,&rdquo; Martin said. &ldquo;We&rsquo;re not saving for tomorrow.&rdquo;</p><p>The rate at which the city&rsquo;s pension funds are cashing out investments has more than tripled since the year 2000, according to a WBEZ analysis. Last year, the four funds liquidated more than $1 billion.</p><p>The more the funds liquidate, the less money they can make on investments, which could lead to even more liquidation in order to have enough money to pay out to retirees. Pension experts say this is a dangerous cycle - kind of like eating yourself to avoid going hungry.</p><p>This whole situation makes Tony Martin angry - and he says it should make taxpayers angry, too.</p><p>&ldquo;They should be outraged that we&rsquo;re even in this situation,&rdquo; Martin said. &ldquo;It should have never gotten to this point. And who is to blame?&rdquo;</p><p><strong>Blame everybody</strong></p><p>The structural funding problem with Chicago&rsquo;s four pension systems is not entirely responsible for the current crisis, experts and observers say, but it left the funds ill-equipped to deal with the market downturns of the early 2000s.</p><p>And political deals between City Hall and labor unions burdened the system even more.</p><p>&ldquo;If you&rsquo;re looking for who to blame, it&rsquo;s everybody,&rdquo; said Dana Levenson, who served as Chicago&rsquo;s Chief Financial Officer from 2004 through 2007.</p><p>Levenson says even Daley&rsquo;s partly responsible, when he agreed to benefit increases and early retirement offers in order to ease budget pressures on City Hall. Levenson says it would have been hard to justify short-term pain, such as property tax hikes or layoffs, because the problem hadn&rsquo;t yet reached the crisis point.</p><p>&ldquo;By nature, we are all crisis managers,&rdquo; Levenson said. &ldquo;We don&rsquo;t necessarily want to do anything that is going to solve a potential crisis when that potential crisis is way off in the distance.&rdquo;</p><p>After all, the pension funds for city laborers and white-collar workers started the new millenium in pretty good shape. They had so much money the city stopped paying into the laborer&rsquo;s pension fund, and cut back payments to the municipal fund.</p><p>In hindsight, this was a bad idea, said Henry Bayer, who heads up the American Federation of State, County and Municipal employees, a union representing about 3,500 city workers.</p><p>&ldquo;You know, if this were going on in the private sector, there&rsquo;d be employer&rsquo;s going to jail,&rdquo; Bayer said.</p><p>But along with those cutbacks in funding in 1998 came benefit increases - increases the union fought for, even though they heaped more future debt onto the pension funds.</p><p>Although he wasn&rsquo;t directly involved in the negotiations, Bayer defended the deal.</p><p>&ldquo;These folks getting these pensions have no social security,&rdquo; Bayer said. &ldquo;We&rsquo;re a world-class city, and we can&rsquo;t afford a pension system for people that served the public?...I don&rsquo;t accept that.&rdquo;</p><p>Finally, in 2010, Illinois lawmakers tried to rectify these decades of underfunding by <a href="http://www.wbez.org/story/chicago/daley-calls-general-assembly-change-police-firefighter-pension-plans">forcing City Hall</a> to dump more money into the police and fire funds - about $590 million more in 2015 - a payment Mayor Rahm Emanuel says Chicago simply can&rsquo;t afford.</p><p>&ldquo;Should Springfield fail to pass pension reform for Chicago, we will be right back here in the council early next year to start work on the city&rsquo;s 2015 budget -- a budget that will either double city property taxes or eliminate the vital services people rely on,&rdquo; Emanuel told aldermen during <a href="http://www.wbez.org/news/mayor-emanuel-warns-pension-cliff-2014-budget-speech-108993">this year&rsquo;s budget speech</a>.</p><p>Emanuel says Chicago needs a break from its state-mandated spike in pension payments. He says there is no Plan B.</p><p>And exactly what Plan A looks like is still unclear.</p><p><em><a href="http://www.wbez.org/users/akeefe">Alex Keefe</a> is political reporter at WBEZ. You can follow him on <a href="https://twitter.com/WBEZpolitics">Twitter</a> and <a href="https://plus.google.com/102759794640397640028">Google+</a>.</em></p></p> Sun, 08 Dec 2013 11:38:00 -0600 http://www.wbez.org/news/experts-say-chicago-has-public-pension-system-set-fail-109329 House committee OKs Madigan pension plan http://www.wbez.org/news/house-committee-oks-madigan-pension-plan-106926 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/RS2798_AP080109029993-madigan-scr_0.jpg" alt="" /><p><p>SPRINGFIELD, Ill. &mdash; An Illinois House committee is endorsing a plan by Speaker Michael Madigan to tackle a Goliath-sized public-employee pension deficit.</p><p>The Personnel and Pensions Committee OK&#39;d the Chicago Democrat&#39;s plan 9-1 Wednesday. It moves to the floor for a vote but needs Senate approval too.</p><p>The plan calls for higher pension contributions by employees and limits on how much in pension benefits retirees may collect.</p><p>Employee union officials complained the proposal violates a constitutional prohibition on reducing benefits.</p><p>Senate President John Cullerton thinks employees should get a choice of increased cost-of-living increases or subsidized retirement health care.</p><p>Decades of underfunding by state officials have left the five pension systems $97 billion short of what they need to cover all current and retired employees.</p></p> Wed, 01 May 2013 12:01:00 -0500 http://www.wbez.org/news/house-committee-oks-madigan-pension-plan-106926 S&P lowers Illinois credit rating, blames pensions http://www.wbez.org/news/sp-lowers-illinois-credit-rating-blames-pensions-105157 <p><p>Standard &amp; Poor&#39;s has lowered Illinois&#39; credit rating due to concern over the state&#39;s failure to address its $96 billion pension fund deficit.</p><p>The company said Friday that it downgraded Illinois&#39; general obligation bonds from A to A-minus and has given an A-minus rating to $500 million in general obligation bonds that the state plans to issue in February.</p><p>Ratings agencies have been downgrading Illinois&#39; credit over the last several years. Moody&#39;s Investors Services and Fitch Ratings both downgraded the state&#39;s credit outlook in recent months.</p><p>Standard &amp; Poor&#39;s says that given the Legislature&#39;s track record, it doesn&#39;t think lawmakers will fully address the pension fund deficit. The downgrade could mean taxpayers will pay a higher interest when Illinois issues bonds to pay for construction projects or other major expenditures.</p></p> Fri, 25 Jan 2013 15:04:00 -0600 http://www.wbez.org/news/sp-lowers-illinois-credit-rating-blames-pensions-105157 Speaker Madigan drops cost shift for pension plan http://www.wbez.org/news/criminal-justice/speaker-madigan-drops-cost-shift-pension-plan-99675 <img typeof="foaf:Image" src="http://llnw.wbez.org/main-images/madigan speaker - AP.jpg" alt="" /><p><p>After a long, frustrating day Wednesday, Illinois House Speaker Mike Madigan could be making way for public pension reform in Illinois.</p><p>Earlier this week, Madigan sponsored a pension reform bill in the House (SB 1673) that would have suburban and downstate school districts pick up the pension costs for their teachers.&nbsp;That could have shifted billions onto local tax rolls. That worried school districts statewide as to how they were going to pay for such an item.</p><p>&ldquo;I think that there ought to be a shift in the responsibility for the normal cost so that going forward the people making the spending decisions will be called upon to pay the bills,&rdquo; Madigan said on the House floor after a long day of debate and heated discussions on pension reforms with Gov.Pat Quinn and House Minority Leader Tom Cross, R-Oswego.</p><p>Madigan knew Cross would be opposed to putting teacher pension payments on suburban and downstate districts.</p><p>And he was: Cross threatened to block passage of the state&rsquo;s 2013 budget if Madigan didn&rsquo;t move away from his cost-shift provision.</p><p>&quot;Let&#39;s pass a pension reform bill without a cost shift, tonight or tomorrow morning and be done with it,&quot; Cross said on the House floor late Wednesday. &quot;We&#39;ll get the budget done, we&#39;d have done Medicaid, we&#39;ve done pensions, we&#39;ve done retiree healthcare, a successful session with bipartisian collaborative effort and be done with it. My question to you (Madigan) is why not? Why not do it?&quot;</p><p>Cross added, &quot;We know what it takes to have a pension bill. We know what will pass the House, what will pass the Senate, what the governor will sign and we can do it without the cost shift, without the $20 billion property tax increase on downstate, suburban schools.&quot;</p><p>But &nbsp;Madigan seemed shocked to learn that his Democratic teammate Gov. Pat Quinn opposed his cost-shift move as well.</p><p>&ldquo;I was surprised that the governor disagreed with me on the issue. He agrees with the Republicans,&rdquo; Madigan said.</p><p>With that, Madigan said he intends to remove his name as the House sponsor for the bill.&nbsp;&ldquo;I&rsquo;ve arranged with the clerk that the sponsorship of Senate Bill 1673 will be changed from me to Mr. Cross,&rdquo; Madigan said.</p><p>A House executive committee will take up the issue this morning, the last official day of the Spring legislative session. &nbsp;Bills remain to be considered and passed to stabilize the state&rsquo;s collapsing pension and Medicaid programs.</p><p>Madigan&rsquo;s shift was hardly the only thing that happened on a marathon Wednesday.</p><p>&bull; The House adopted a bill to keep the state&rsquo;s only super-max prison open. Tamms, in far southern Illinois, will be reorganized to become a medium-security prison to allow more inmates to be housed at the facility. Gov. Quinn is proposing closing several correctional facilities to save money. The House is trying to save unionized correctional jobs.</p><p>&bull; The Illinois House approved a plan to drop campaign-donation limits in races where super PACs jump in with big money.&nbsp;The legislation would apply in races where an independent super PAC spends more than $100,000 supporting a legislative candidate or $250,000 supporting a statewide candidate. If that happens, then the opposing candidate would not have to follow the state&#39;s new&nbsp;limits on donations. The bill passed 63-55 Wednesday in the Illinois House and now goes to the Senate.</p><p>Government watchdog groups fear this will create a loophole for&nbsp;big money to pour into political races. But House Majority Leader Barbara Flynn Currie says it would let candidates &quot;fight fire with fire&quot; if they&#39;re targeted by super PACs with deep pockets.</p><p>The Illinois House also approved a measure by state Rep. Marcus Evans (D-Chicago) to ban landfills in Cook County. The bill moves to Gov. Quinn for his signature.</p><p>The state Senate approved a bill to allow the sale of Powerball lottery tickets to be sold over the internet. The measure heads to the governor.<br /><br />House Democrats also moved forward their own version of a new budget set at $33.7 billion that features deep cuts to schools, public universities and health care services for the poor. In the end, the state will still end up spending $300 million more than in the current budget, but is still $4.4 million under the cap agreed up in a spending resolution, according to Madigan.</p><p>&nbsp;</p></p> Thu, 31 May 2012 03:54:00 -0500 http://www.wbez.org/news/criminal-justice/speaker-madigan-drops-cost-shift-pension-plan-99675 Investigation zeros in on Illinois' community college pension system http://www.wbez.org/episode-segments/2011-09-08/investigation-zeros-illinois-community-college-pension-system-91660 <img typeof="foaf:Image" src="http://llnw.wbez.org/segment/photo/2011-September/2011-09-08/Andy_Shaw_BGA.jpg" alt="" /><p><p>Another issue hung over the state's head is its pensions; more money was promised than available to distribute. But, a new investigation from the <a href="http://www.bettergov.org/" target="_blank">Better Government Association</a> took a closer look at one group that continued to make out nicely upon retirement. The BGA’s president and CEO<a href="http://www.bettergov.org/about/staff.aspx" target="_blank"> Andy Shaw</a> told <em>Eight Forty-Eight</em> more about the investigation.</p><p><em>Music Button: Ocote Soul Sounds, "Pirata", from the CD Taurus, (ESL)</em></p></p> Thu, 08 Sep 2011 14:02:00 -0500 http://www.wbez.org/episode-segments/2011-09-08/investigation-zeros-illinois-community-college-pension-system-91660