Chicago singing the blues on pension problems
Another showdown on public pensions is looming in the General Assembly.
That was quite a battle last week in Springfield, where state legislators bit the bullet and passed reductions in pension benefits that outraged public employees and retirees.
The potential blow-back was so serious that Gov. Pat Quinn made a point of signing the controversial legislation in a private, rather than a public, ceremony. That controversy now moves to the more sedate confines of the courts, where the back-and-forth will be more polite.
But the legislative shooting on pensions is not quite over. Now that legislators have disposed of the state public pension issues, they have the pleasure of addressing the city of Chicago's disastrous public pensions.
Unfortunately, the city's stewards of pensions for city workers, police officers, firefighters and teachers have been no more responsible for their public pensions than past governors and legislators were in managing the state pension systems.
Here's a statistic that demonstrates just how bad the Chicago pension problem is. The pension shortfall for city employees is $19.5 billion, roughly $7,100 per city resident. That $7,100 per-person liability figure, which doesn't include another $7 billion for the city's teacher pensions, is nearly eight times the per-person cost of the unfunded pension liability of Detroit.
Surely, readers remember Detroit, the one-time industrial powerhouse that is now in bankruptcy.
Chicago hasn't made any noises yet about following Detroit into bankruptcy. But Mayor Rahm Emanuel has been pressing legislators about the need to modify the retiree benefits packages, and he has warned that services will suffer if changes are not made.
City politicians did the same thing as their state brethren — they didn't make the actuarially mandated pension contributions. Instead, they spent the money elsewhere. The result is that Chicago has the worst-funded pension system of any city in the United States, and, as hard as it may be to imagine, the problem is getting worse.
Because of the underfunding issue, state law requires Chicago to increase next year's pension contribution to more than $1 billion, a 50 percent increase. The payment to the separate teachers' pension also is scheduled to skyrocket, jumping from $196 million to $600 million.
The fact is that Emanuel doesn't want to make those contributions, and he'll be pressing state legislators to come up with a collection of benefit cuts and revenue increases to ease that burden.
That's problematic from a policy standpoint, but it would be clearly less so from a political standpoint.
Chicago-area legislators will be reluctant to vote for benefit cuts, but the same legislators located just outside Cook County and further downstate won't be nearly as sympathetic.
Fearing that reality, Chicago's public union leaders already are sounding the alarm.
Jesse Sharkey, vice president of the Chicago Teachers Union, is promising protests on the level of those conducted by public union leaders in Wisconsin when the Legislature there passed legislation cutting back union power.
The reality, however, is that there simply isn't enough money to go around in the city's government and schools to fund public pensions and public services. So, ultimately, state legislators will have no choice but to accede to Emanuel's request to pare back pension benefits to keep city services going.
The city already is bleeding from self-inflicted wounds. If they're not treated, the prospect of collapse will enter the picture.