Chicago will face a substantial increase in contributions to its police and fire pension funds in 2016. Chicago's unfunded pension liability amounts to about $7,000 for each resident of the city. How should the city solve its pension crisis? Please be specific about pension changes, spending cuts or revenue increases you would support.Budget
Ensuring the city's pension funds are on a sustainable path to protect employee retirement savings and Chicago taxpayers is integral to getting the city's finances back on track. I have been clear that I reject the false choice of either bankrupting the retirement security of hard-working City employees, or making Chicago taxpayers bear the burden along by relying only on substantial tax increases. Over the last three years, my administration has worked collaboratively with the Municipal and Laborers Pension Funds to craft a long-term solution that achieves this goal. This reform will provide the retirement security that 61,000 workers and retirees have earned – all while respecting our taxpayers and protecting vital City services. We changed the compounding cost of living adjustments (COLA) to a simple adjustment, and implemented three COLA pauses in the next seven years to give the fund a chance to catch its breath. Active city employees will see a 2.5% increase in their contribution that is phased in over five years. And we raised the multiplier that the City currently uses and moves it on a path to an actuarially-determined structure in the near future. We applied the same strategy to our successful solution to the Park District pension fund that was on a path to become insolvent in less than a decade. This collaborative approach can and should be applied to crafting the solution for Police and Fire Funds. To date, I am the only elected official to successfully pass pension reform legislation that was executed in collaboration with workers while incurring enough savings to protect taxpayers. I also believe that savings that can be reinvested in the pension system do not just come from raising taxes or cutting retirement payments. The changes to retiree health care benefits, for example, were very difficult to make but necessary in order for us to balance our budget and put our City on stronger financial footing. We took a balanced approach: rather than pull the rug out from retirees when the Korshak settlement expired, my administration put forward a three-year phase out of the health plan for all retirees except those of the original Korshak plaintiff's class – some our oldest and most vulnerable retirees. For those retirees and their spouses, the city will continue to provide health care for the remainder of their lives. For the rest of the retirees the three-year phase out of this benefit will allow participants to enroll in alternative plans through the affordable care act. This reform will save $100 annually.
This is a problem we created together as a City, and it is a problem that will require everyone's participation to resolve. That said, I do not support cutting benefits for current retirees. Many retired City workers have only their pensions to see them through their old age. They have worked hard and paid into their pension funds for years, and it would be wrong to change the rules on them now. Although the Supreme Court of Illinois has not yet weighed in on the matter, I was not surprised that the Circuit Court ruled recently that the State pension legislation violated the clear language in the State Constitution, declaring pensions to be a contractual right of pensioners. If the Supreme Court accepts the Attorney General's argument that the State may limit pension benefits as an exercise of its police powers, we will carefully review the ruling and its implications for further addressing this very serious problem. Regardless of the outcome of that litigation, I would consider reducing the City's contribution to pension benefits for future employees and other cost-saving measures. However, I believe in the right of collective bargaining and the important social policies that it reflects, and I would prefer to negotiate such changes with the elected union leadership. I respect the contributions our workers make to our city, and I believe we will be able to come up with a solution to everyone's advantage, so long as we work together from that foundation of respect. I also have a record of reducing taxes on Cook County taxpayers, and I think it is important for our families and businesses to know we will not try to balance our books on their backs. I do not support a property tax rise to fund pensions, because I know too many families – and especially senior citizens -- who are already struggling to pay their existing tax bills.
Every payday, police and fire pay into their pension despite the city breaking their promise to our first responders. A pension is a guarantee, and I intend to make sure the obligation is met. I believe we should use some of the TIF money to begin making the investment in what we owe so we can ensure that we are meeting our commitment to our bravest citizens. Further, with savings we will find after a top to bottom audit of city government, there will be additional money that should be used to make the city's pension payment.
I strongly believe governments should be legally required to make pension contributions every year. The city's Pension obligations are now $37.3 billion. In 2016, the city is required by law to make a $550 million contribution to shore up police and fire pension funds with assets to cover just 29.6 and 24 percent of their respective liabilities. The Illinois legislature passed a bill cutting pensions and raising the retirement age for state workers, in the hope of saving a hundred and sixty billion dollars in pension costs over the next thirty years. The fate of that legislation rests in the hands of the courts. Municipal Employees and police pension funds pay substantially less in management fees than do the firefighters and laborers pension funds. We must Improve investment returns and reduce the millions of dollars in fees paid to investment managers. We must keep our commitment to longstanding city employees. However new hires should have lower cost-of-living adjustments and their employee contributions should be increased. Trim retirement benefits and pay higher wages. We must employ a defined contribution system as opposed to a defined benefits system.
As a new candidate I have to access the problem with my business expertise.