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Labor Unions Respond To Emanuel's Pension Reform Plan

By Chuck Sudo in News on May 9, 2012 10:00PM

© 2012 City of Chicago, photo by Brooke Collins

As expected, labor unions aren't happy with the pension reform plan Mayor Rahm Emanuel revealed in Springfield yesterday.

Emanuel's "roadmap to retirement security" calls for 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. Workers would also choose between a 401K plan and a standard benefits plan.

Jorge Ramirez, president of the Chicago Federation of Labor, released a statement criticizing Emanuel's plan and highlighted the city's lack of accountability for their role in the pension mess.

"Unlike state leaders who have acknowledged their failure to meet their contractual obligations, the city makes no such admission. Despite saying that city workers are not to blame, Mayor Emanuel’s proposal would punish them by forcing them to work longer before retiring, make higher contributions and potentially receive less in retirement benefits.

"The mayor’s ‘roadmap’ does little to accept responsibility for the current problem and his threats to pit the public against city workers are harmful to the spirit of cooperation and trust we’ve worked to achieve. Mayor Emanuel is breaking one of his biggest promises he made to labor, that he would sit down with unions representing city workers to discuss any proposed changes to the pension system, prior to making his proposals public."

AFSCME Council 31, in a statement, said the mayor "distorted" the severity of the pension problem.

"The mayor's 'roadmap' actually points the way to economic insecurity for retired public servants. It would significantly reduce benefits and increase costs to employees. While every Social Security beneficiary receives periodic cost-of living adjustments, the mayor's plan would completely eliminate any such adjustments for city retirees for the next decade. This approach is unfair to retirees and it is a violation of the state's constitution, guaranteed to trigger costly litigation.

"The unions representing city employees have repeatedly conveyed to the mayor our willingness to work constructively to solve the pension funding problem. Yet he has never once met with us to hear our views or put forward the suggestions he unveiled (Tuesday).

"No one has a bigger interest in assuring the fiscal stability of city pension funds than the retirees and employees who depend upon them. Our union remains committed to working toward a solution that is fair and constitutional, but we need an administration that shares our commitment to a collaborative process and a genuine solution."

AFSCME Council 31 also noted in their statement the average pension received by their members from the city Municipal Fund is $31,000 and that, "unlike every private citizen, city employees don't receive Social Security."

And the unions have a point about the city accepting accountability for its part. The Municipal Fund and the city's other pension funds lost money when it was managed by DV Realty Advisors LLC, an investment fund founded by Allison Davis and Robert Vanecko. (Vanecko is a nephew of former Mayor Richard M. Daley and Davis had strong ties to Daley.)

The city's pension plans fired DV Realty in January, and a lawsuit against the company claims the investments by DV Realty of pension plan funds generated a negative 28.5 percent return since its 2006 formation. DV Realty also attracted attention to itself over how they raised $66.5 million from the pension funds and the role Vanecko may have had in the fundraising. (Source: Crain's)