Panel, civic groups recommend cuts to city pension benefits
Daley commission, 2 watchdogs differ on degree of cuts, other changes
Saturday, May 1, 2010
All new Chicago city workers should retire later with lower pension plan benefits — even after taxpayers and employees contribute more — according to recommendations from a panel Mayor Richard Daley appointed more than two years ago.
The changes are needed because the city's four pension plans are short by nearly $14.6 billion, or more than half the amount needed to cover projected benefits, stated the new report by the Commission to Strengthen Chicago's Pension Funds.
Without the proposed fixes, closing all but 10 percent of the gap during the next half-century or so would require City Hall to set aside a budget-busting $660 million more a year for pensions starting in 2012, the panel concluded.
The gap is less than officials thought until a few weeks ago, when the state reduced pension benefits for new municipal employees except for firefighters and police officers. Absent further pension reforms, Chicago's firefighters pension fund could go broke in just 10 years, followed by the police officers fund 12 years later, the report stated.
The Daley administration released the report late Friday afternoon, an approach City Hall sometimes employs to ensure scant media coverage, particularly on complex issues.
The mayor has had the report since March 31, according to a critique of the recommendations issued Friday by the Civic Committee of the Commercial Club of Chicago, which had two members on the commission. The Civic Federation, a government budget watchdog group, also was critical of the Daley panel's report.
Both groups concluded that pension benefits should be reduced going forward for existing employees, as well as new employees. They also suggested contributions from employees should increase and retirement ages should be raised.
"Our concern is that the recommendations did not go far enough to restore the funds' financial health," said Laurence Msall, Civic Federation president. He said the city also needs to cut hundreds of millions of dollars in services, starting next year, even with increased contributions.
"We believe that this is a very, very serious issue," Msall said. "It impacts the city's financial health, and it impacts how the credit agencies evaluate the financial health of the city."
Civic Committee President R. Eden Martin said the city's recommendations would only halt the growth in the pension shortfall, rather than reduce it.
"The state's the one that created the problem, not the city," he added. "The city is the one that's stuck with the problem."