Emanuel budget fails to plan for $550 million increase in city pension costs
Missing from Chicago Mayor Rahm Emanuel’s recent 2015 budget proposal is a plan to prepare for a massive increase in the city’s pension costs. The city’s required pension payment is slated to more than double next year. The increased cost wasn’t included the 2015 proposal because the city won’t have to pay for the full...
Missing from Chicago Mayor Rahm Emanuel’s recent 2015 budget proposal is a plan to prepare for a massive increase in the city’s pension costs.
The city’s required pension payment is slated to more than double next year. The increased cost wasn’t included the 2015 proposal because the city won’t have to pay for the full increase until 2016, according to Alexandra Holt, the city’s budget director.
But regardless of whether the full payment is due on the last day of 2015 or the first day of 2016, not planning for a known $550 million increase in pension costs is an injustice to the families, entrepreneurs and businesses that call Chicago home.
Without real reform, the increased pension payment will likely lead to a combination of massive tax hikes and cuts to core services.
To put the increased pension cost into context, the amount is equivalent to what it would cost to:
- Keep almost 4,000 police officers on the street
- Keep approximately 3,450 firefighters on duty
- Fund the resurfacing of almost 12,500 city blocks
- Fund the operating budget for the entire Chicago Public Library system for six years
Perhaps the biggest thing missing from Emanuel’s 2015 budget proposal is leadership. If Chicago doesn’t address its pension crisis, the unfunded debt will put its taxpayers and government workers at risk.
Chicago’s fire pension fund has only 25 cents for every dollar it should have in the bank today to pay for future benefits. The police fund, only 31 cents. Unless the city develops a plan to structurally overhaul its pension systems, those funds are in danger of becoming insolvent.
Many government officials use the legal battle over the state’s pension reform plan as an excuse to kick the pension-reform can down the road. But there’s one pension reform Emanuel should move forward with tomorrow – moving all new workers onto 401(k)-style retirement plans.
The creation of 401(k)-style plans for new workers won’t solve Chicago’s current financial problems, but it will stop the bleeding and avoid conflict with the state constitution.
It will also create retirement security for new state workers – they’ll own and control their own retirement accounts and won’t have to pay into a system that may collapse and leave them with no money when they retire.
Emanuel started to get it right two years ago when he visited Springfield and called for bold reforms that included 401(k)-style retirement plans. The mayor should revisit those calls for real pension reform.