Civic leaders: Gov. JB Pritzker should veto bitter pension sweetener for Chicago
This pension sweetener legislation, shepherded through the legislature by state Sen. Robert Martwick, D-Chicago, with little to no public debate, will boost pension benefits for Tier 2 police officers and firefighters, those who began work in 2011 and after and who fall under a different pension plan than their more senior colleagues. The legislation makes changes to how pensionable salary is calculated at retirement — including by increasing the cap on pensionable salary — and would increase the annual cost-of-living adjustment for pensioners.
Our three organizations support reasonable retirement benefits for public employees, but we also strongly believe that the people who pay the taxes should be prioritized, too. In this case, they weren't, and the legislation, which was sent to the governor's desk, makes a very bad situation even worse. It would be a bitter pension sweetener, indeed.
Right now, Chicago police and fire pension funds are grossly underfunded. Specifically, city taxpayers owe current and future retirees about $20 billion more than they have to pay police and firefighter pensions. Illinois taxpayers have an even worse problem, owing about $144 billion more than they have. For both city and state, the ratio of assets on hand to pension obligations is among the lowest in the country — around 25% funded for the Chicago police and fire funds.
Chicago and Illinois have among the most underfunded pension systems in the entire country. Taxpayers are on the hook for a combined state and local pension tab of $459 billion, or more than $90,000 per household.
No one wants to be miserly when it comes to our first responders. They risk their lives to protect ours, and we deeply appreciate their service. But our appreciation for their work does not erase the daunting mathematical dilemma we face as a city and a state with ever-increasing pension costs and no responsible plan to fully fund them.
This new mandate comes at a time when both the city and the state are facing enormous fiscal uncertainty. The Chicago regional transit system has never recovered ridership levels since the pandemic and is now facing the possibility of extreme service cuts. A proposal to rescue and reform the system, and address a $771 million 'fiscal cliff,' fell short in the spring legislative session.
What little remains of pandemic relief dollars from the federal government is drying up. The Trump administration is threatening funding cuts to both the city and the state. And the president's newly adopted budget could cut billions in federal Medicaid funding to Illinois.
For years, our organizations have called for policymakers to resolve the unfunded pension issues. We have engaged with stakeholders across the state, including labor, and been open-minded about solutions, including higher taxes — so long as the incremental revenue is devoted entirely to pension funding. We have recognized and accepted the constitutional restriction on reducing benefits for current employees. And our organizations saluted state leaders when they passed the Tier 2 legislation over a decade ago to better manage benefits for future retirees and when they blocked an end-of-session effort in late May that would have added an estimated $60 billion in new benefits to the state pension systems.
But now, the bill on its way to Pritzker's desk would undo much of that work, making the city less affordable, putting its credit rating at risk and shifting the cost to future generations. Illinois politicians have been doing this to the city for decades, and we are hopeful that our governor will end this fiscally irresponsible practice. At a minimum, we should have an honest assessment of the short- and long-term costs and consequences.
We urge Pritzker to veto this legislation, and we also urge every member of the legislature to reconsider their position. Although they voted unanimously in favor of the sweetener just before the session gaveled to a close, they might reflect more deeply on the long-term costs and choose not to override a fiscally astute governor's veto.
We also call on Chicago Mayor Brandon Johnson and aldermen to be vocal in opposition to this legislation, making it clear to the public and state leaders that they do not support an unfunded pension mandate that will significantly worsen an already-precarious budget situation.
Now that the governor has announced plans to run for a third term, we implore him to build on his strong record of improving the state's finances by prioritizing a long-term plan to stabilize state pensions. And we call on Chicago's mayor and the City Council to create a companion proposal at the local level. We stand ready to help.
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