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Teachers Union To State Lawmakers: Don't Extend Pension Reform Law To City Funds

By Chuck Sudo in News on Feb 17, 2014 9:30PM

Chicago Teachers Union President Karen Lewis, seen at a rally protesting school closings in March. (Photo credit: Aaron Cynic/Chicagoist)

A report released by the Chicago Teachers Union proposes any attempts to apply the framework of Illinois’ recently passed pension reform law on Chicago’s underfunded pensions would have negative consequences on the city including destabilizing the retirement benefits of city employees and hurting Chicago’s economy.

The report, The Great Chicago Pension Caper: Neighborhood Destabilization in an Age of Austerity,” looks at how Senate Bill 1 would be used as the guide for reforming Chicago’s pensions and claims “teachers, municipal workers and retirees in Chicago are likely to see their retirement incomes reduced by at least 10% over a 20 year period.”

The report states, “pension cuts will immediately harm retiree livelihoods and also disrupt current city workers’ retirement planning. Current public workers will have their pensions reduced the most: many will face nearly a 20% cut in anticipated retiree income over their first two decades of retirement. These cuts will negatively impact not only public workers’ quality of life but entire communities.”

The report added, “Three of the top four employers in Chicago are the City itself, the Chicago Public Schools and Cook County. These three entities employ over 90,000 people, all of whom depend on public pension plans to ensure dignified retirements and stable communities. The mayor’s proposal will amount to roughly $270 million in cuts to retirement income over a period of just five years.”

Last week Illinois Senate President John Cullerton said the upcoming $613 balloon payment required to balance the teachers’ pension fund was untenable and the teachers union would need to cede benefits earned in previous labor negotiations or face the prospect of “thousands and thousands” of layoffs. Cullerton wouldn’t give specifics as to how he would fix Chicago pension mess but offered up SB 1, which would save the state $145 billion over a 30-year period, as a good guideline to start. Mayor Rahm Emanuel, meanwhile, has proposed a plan to overhaul Chicago’s pensions similar to one Springfield passed for teachers unions outside of Chicago.

The CTU report theorizes teachers could lose $700 monthly if cuts similar to those proposed in SB-1 were imposed on the teachers’ pension fund, which CTU President Karen Lewis called a “pension heist” while the report stated SB-1 style reforms would impact African-American, middle-class workers the hardest while neighborhoods such as Beverly and Morgan Park (teeming with city workers) would destabilize the most.

None of the top 15 Chicago zip codes as ranked by the annual amount of public employee retirement benefits are located near downtown. Women make up three-quarters of the Chicago Teachers Pension Fund (CTPF) and 60% of the Municipal Fund (MEABF), and the public sector jobs that provided people of color a pathway to the middle class also provide a dignified retirement. Cuts to pensions thus disproportionately impact women and people of color. Having barely weathered the impacts of the 2008 financial crisis, we find that the very communities that are bastions of the middle class are now in peril of facing another economic disaster in the form of future pension cuts.

The report concludes that workers have borne the burden of cuts to city services for far too long.

Chicago families can ill afford more bad economic news as the city struggles to rebound from a crippling foreclosure crisis and anemic job growth in virtually every area outside of the central business district. The largest number of school closures in American history followed by devastating school budget cuts has left communities reeling. Last fall Chicago’s foreclosure rate was the third-highest among the nation’s 20 largest metropolitan areas. National data shows that during the Great Recession and foreclosure crisis, the housing security of older Americans deteriorated the most.3 Maintaining retirement security is essential to keep neighborhoods from becoming further littered by abandoned boarded up homes, empty school buildings and shuttered businesses.

Meanwhile, despite the Mayor’s claims of “job creation”, the bad economic news continues. Layoffs at Macy’s, Sears, Motorola, and Dominick’s in the last few months alone will affect over 9,700 Chicago workers and their families.4 Mayor Rahm Emanuel has proposed to compound this already bleak picture by enacting hundreds of millions in pension cuts over the next 5 years.

Chicago Public Schools CEO Barbara Byrd-Bennett told the Sun-Times in a statement:

“The solution to this must provide a secure retirement for our teachers and retired educators, protect our children from unconscionable cuts to the classroom and looks out for taxpayers and homeowners in every neighborhood who struggle to make ends meet. This is not the time for divisive or misleading tactics such as the ones being used here. Instead, we need a balanced approach to solve the biggest financial threat our city and school system have ever seen.”

CTU’s report recommended closing corporate tax loopholes and a small hike in the property tax rate as possible solutions to the looming pension crisis.

Chicagoist has included CTU's report below.

The Great Pension Caper by Chicagoist