Emanuel's Pension Reform: Raise Retirement Age, Freeze Cost-Of-Living Adjustments
By Chuck Sudo in News on May 8, 2012 9:00PM
© 2012 City of Chicago, photo by Brooke Collins
In his first trip to Springfield since becoming Mayor, Rahm Emanuel detailed a worst case scenario situation to lawmakers today during testimony before the Illinois House Personnel and Pension Committee.
Faced with a $20 billion pension crisis, Emanuel spoke of a Brave New World where Chicago would have to choose between paying pensions to retired city workers or cutting the most vital city services.
“Our taxpayers can’t afford to choose between pensions and police officers, pensions or paved streets or pensions and public health,” he told lawmakers. “Without pension reform, we’ll be forced to mortgage our children’s future to pay for our past.”
Emanuel warned legislators that Chicago property taxes could increase by 150 percent if they don't pass pension reform. He also laid out his own plan for pension reform that closely mirrors the plan laid out by Gov. Pat Quinn last month.
Emanuel's plan, which he calls a "roadmap to retirement security," involves an increase in the retirement age to 67 for most civilian workers, and to 60 for police and fire department workers; a one percent yearly increase in employee contributions for five years, to 14 percent; and a 10-year freeze in annual cost-of-living adjustments for current retirees. After that, the plan would go to a simplified cost-of-living increase instead of compounded increases. Emanuel noted that a city retiree who made $65,000 in 1995 now receives $100,000 today under the current plan. the plan also calls for a choice for city workers between a defined benefits plan and a 401K. Finally—and this may be the most major aspect of Emanuel's plan—the city would not increase its contributions until reform is reached.
Without reform, the city's four pension funds would be insolvent by 2030, and that doesn't include a $6.8 billion shortfall with the teacher's retirement fund. Emanuel called it a "day of reckoning." Under a state law, Emanuel said Chicago would have to raise property taxes by up to $550 million to begin to make up for the shortfalls.