The Chicagoist will be launching later but in the meantime please enjoy our archives.

Chicagoist's Top Stories Of 2013: The Pension Crisis In Chicago And Illinois

By Chuck Sudo in News on Dec 29, 2013 5:15PM

Image credit: Pincasso/

At $96 billion and growing, Illinois' underfunded public pension problem is by far the worst in the nation. But the pension problem didn't happen overnight, nor is it the fault of a single politician or special interest group. It's a crisis decades in the making that crosses political lines and finding a solution for it takes on an even greater urgency in the wake of the city of Detroit's bankruptcy filing earlier this year—the largest municipal bankruptcy filing in history.

Which was why it was noteworthy when top Illinois political leaders reached a tentative framework in late November on a pension reform plan. The bill, championed by Illinois House Speaker Michael Madigan, calls for the following:

- A hike in the retirement age for state workers currently age 45 or younger
- A reduction in cost of living allowances using a formula based on how long a worker held their job and only toward a portion of their pension
- Prohibiting state pension systems from using pension funds to pay healthcare costs
- Removing all pension matters from collective bargaining talks except pension pickups
- Reducing employee salary contributions to their pensions by 1 percent
- Illinois will contribute $364 million in funding in 2019 and $1 billion every year thereafter until 2045 or until the pensions are fully funded.

The cuts are expected to save the state $160 million over the next 30 years.

The passage of the bill during the fall veto session was a marked contrast to the impasse during the spring legislative session where dueling pension reform bills from Madigan and Illinois Senate President John Cullerton.

While Madigan's plan passed the House with ease, the Senate soundly defeated it. Cullerton's more modest pension reform plan offered workers and retirees a litany of options as to whether to pay more into their pensions or take less once they retired. It also allowed pension matters to remain in collective bargaining negotiations, one of many reasons organized labor supported Cullerton's plan over Madigan's.

The main dispute between Cullerton's and Madigan's dueling bills was a legal one: does changing already promised pension payment benefits violate the Illinois Constitution?

The We Are One Illinois labor coalition promised a legal challenge of the bill after Gov. Pat Quinn signed it into law earlier this month and the Illinois Retired Teachers Association on Friday filed the first of what is expected to be several lawsuits on behalf of labor groups challenging the legality of the new law.

It will be wise moving forward to see if the state will use a federal judge's ruling allowing Detroit to move forward with its bankruptcy plan as a legal precedent.

How the deal in Springfield will affect Chicago's own growing pension crisis remains to be seen.

As we've written before, the city is facing a $600 million payment to the underfunded police and firefighters’ pensions in 2015 mandated by the state. Since city budgets in recent years have been balanced by nickel-and-diming residents with tax, fine and fee hikes—as well dips into "rainy day funds" established by the money from privatizing civic resources like the Skyway and the parking meters—Chicago doesn't have $600 million laying around. Which is why Mayor Rahm Emanuel has been lobbying downstate lawmakers to postpone that payment.

An Emanuel-supported bill, introduced by Cullerton at the spring legislative session, asks to both postpone the payment to the city's police and firefighters' pensions until 2022 and a series of property taxes (the most verboten subject among voters) beginning in 2018. Critics of the plan said Emanuel was kicking the proverbial can further down the road.

Making matters worse was the series of downgrades to Chicago's bond ratings in 2013. Moody's, in particular, cited the city's underfunded pensions and the money being spent on the city's efforts to fight violent crime as reasons for the downgrades, while Civic Federation President Laurence Msall said the pensions are at a point where "they may not be able to be saved."

There may be some sanity to Emanuel's waiting game. The longer goes unresolved, the more Moody's, Standard & Poor's and other groups downgrade the city's bond rating which may give the mayor leverage in future labor negotiations as unions may be willing to make concessions to place the city on firm financial footing.

There are too many things in place to keep Chicago from following in Detroit's footsteps but we aren't out of the woods by any stretch.