Roadmap to Retirement Security
Chicago Mayor Rahm Emanuel took his plans for pension reform to Springfield Tuesday, imploring state lawmakers to address the city’s staggering unfunded pension liability.
Emanuel testified in front of the House Personnel and Pension Committee early Tuesday morning, proposing his own plans for the ailing system. His so-called “Roadmap to Retirement Security” plan has five points:
- Temporarily suspend annual cost-of-living increases for 10 years in order to “stop the bleeding” and implement long-term reforms.
- Increase employee pension contributions by 1 percent every year over the next five years.
- Increase the retirement age for city employees by five years. Emanuel says “pension funds have not kept up” with the longer and more active lives of retirees.
- Offer other types of retirement plans to new employees to make retirement plans “more competitive and consistent with those offered in the private sector.”
- Suspend additional city contributions from the city budget to the pension system until the city creates and implements a viable way to fix it.
In a press release issued the same day, Emanuel says without reform, “City taxpayers will have to pay $1.2 billion a year toward the four pensions for City workers alone,” by 2016.
According to a Chicago Tribune article, the city's unfunded liability for its fire, police, laborers and municipal pension funds is projected to reach $19.2 billion at the end of 2012, up from $14.6 billion at the end 2009. The mayor’s office adds in the press release the standing teachers pension fund will require taxpayers to chip in $517 million by 2013, a jump of $300 million next year. Emanuel’s office says the mayor’s plan would reduce the city’s unfunded pension liability by 40 percent
Emanuel’s testimony comes on the heels of Moody’s Investors Service’s recent downgrade of the city’s Aa3 general obligation rating from stable to negative. The reason for the downgrade: the city administration’s lack of a detailed plan to address its growing pension liability.
“Doing nothing will force me to choose between either letting our pension funds go bankrupt, or raising the City’s property taxes by 150 percent,” said Mayor Emanuel in the press release. “As long as I am Mayor of Chicago, that is a burden I refuse to put on the backs of our taxpayers.”
On Chicago Tonight at 7:00 pm, we sort through what this all means for taxpayers and union members with Chicago City Treasurer Stephanie Neely.