Illinois, the city’s pension fund news is mixed: Crain’s op-ed

The other positive recent pension news from Hinz’s office came out in the Jan. 27 edition of Juice: Lawmakers appear poised to renew one of the few initiatives that have taken a decent share of that unfunded liability.

The measure being considered is a pilot program in which state pensioners can take early withdrawal, taking a lump sum instead of their full pension or, more generally, guaranteed annual increases of 3% of the cost of life. The prepayment option has proven popular since the pilot was launched in 2019: some retirees are happy to receive their money early, either to invest on their own or to use it for other purposes. But it also saves the state money since participants only get a fraction of what they would get if they waited, typically 70 cents on the dollar.

The current program is funded by a $1 billion government bond issue; the renewal, if passed, would extend it for two years and authorize another $1 billion bond financing.

Meanwhile, the program is estimated to have reduced unfunded liabilities by approximately $800 million.

Of course, covering the pension situation in Illinois is a bit like climbing a sand dune: for every two steps you take up the slope, you take one step back. Sure enough, even as Hinz was reporting glimmers of progress in this state pilot program, his colleague AD Quig was reporting on the tax effects of a Chicago firefighter pension increase that Governor JB Pritzker signed into law. last year over the objections of Mayor Lori Lightfoot.

This law doubled cost-of-living adjustments for approximately 2,200 retired firefighters and eliminated a 30% cap on cumulative COLA adjustments. At the time the bill was passed, the Civic Budget Watch Federation warned it would cost taxpayers more than $850 million over 35 years. We now have a full price breakdown. That’s a little less than the most dire estimates, but it’s not small either. According to an actuary with the fire department fund, the city will have to pay an additional $702 million through 2055 under the new law. This represents an average of $20 million per year. Sure, it’s a small fraction of the city’s overall budget, but it’s still money that Lightfoot and his successors will have to scare away, no matter the fiscal terms. The bill also increases the overall unfunded liability for 2022 by $215 million. This will bring the overall liability to just over $7 billion.

“What did the townspeople get out of it? A gift outside of collective bargaining. . . that the Legislative Assembly decided to grant to firefighters because they could,” Civic Federation President Laurence Msall said in an interview with Crain’s. “It validates people who said it was a huge mistake. There’s no savings, no answer where we’re going to find $700 million.

And now, State Sen. Rob Martwick, who sponsored the original legislation, says he’ll do the same for Chicago police, arguing that it’s long been common practice in the city to pay this sugary benefit to retirees while keeping the cost off the books. Better to have the cost factored in, he says. May be. Or perhaps it is a benefit that should, as Msall suggests, be negotiated at the bargaining table by taxpayer representatives.

So there you have it: some pension progress in a state unaccustomed to such things, and pension backsliding in a city that perpetually finds new ways to trip itself up.

Dolores W. Simon