Edit Module
Edit Module
Edit Module
Edit Module

The Chicago Pension Paradox

A new report from the Civic Federation finds that the gap between city employees paying into their pension funds and former employees receiving pension funds has sharply decreased over the past decade. In the wake of changes to pensions for future employees, legislators are looking into options for current employees.

Jason Grotto, one of the authors of the Tribune’s excellent 2010 series on city and state pensions, has a story today on the Civic Federation’s new report on the city and county pension crisis. One thing jumped out at me:

One significant issue highlighted in the Civic Federation report is a 75 percent decrease in the ratio of active-to-retired city and county workers since 2000, meaning there are now fewer workers paying into a system that requires ever more resources.

The chart is dramatic:

Basically, if you save taxpayer money by attrition, it puts more pressure on the pension funds because you not only have more beneficiaries, you have fewer people paying into the pension system. And a lot of those beneficiaries will be people who were working when legislators were taking it easy on ensuring money was going into the system. Here’s Grotto writing in November of last year:

A Tribune review of legislative changes pushed by city officials and union leaders during the last 15 years found that laws governing city pension funds’ contributions and benefits have been changed nearly 40 times, often with little discussion of the financial consequences.

In most cases, pension fund managers had no idea how much the changes ended up hurting them. But in 10 that the Tribune was able to track, the long-term impact on pension funds was more than $3.6 billion.

Hence the raising of the full-pension retirement age, but that still only applies to future employees and those hired since January 1, 2011. Michael Madigan has shown interest in changing pension rules for existing employees, but Senate President John Cullerton says it’s probably not constitutional; the State Journal-Register has a good update on the latest state legislative developments.

The holdup is Article 8, Section 5 of the Illinois constitution:

Membership in any pension or retirement system of the State, any unit of local government or school district, or any agency or instrumentality thereof, shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.

The Northwest Herald reports that state rep Mike Tyron thinks there’s wiggle room.

PS: All this reminds me of Ezra Klein’s line about the federal government: “the federal government has become a large insurance company protected by an extremely well-armed security force.”

Share

Edit Module

Advertisement

Edit Module
Edit Module
Submit your comment

Comments are moderated. We review them in an effort to remove foul language, commercial messages, abuse, and irrelevancies.

Edit Module