Rahm’s police and fire pension “fix” becomes law

On May 30, the General Assembly voted to override Gov. Bruce Rauner’s veto of Chicago Mayor Rahm Emanuel’s plan to delay payments to Chicago’s police and fire pension funds – at a cost to Chicago taxpayers of an additional $18.6 billion over the next 40 years.

Thanks to politicians in the Illinois General Assembly, Chicago Mayor Rahm Emanuel will get away with kicking Chicago’s pension problem down the road again, a move that will cost taxpayers billions of dollars in tax hikes.

On May 30, the General Assembly voted to override Gov. Bruce Rauner’s veto of the mayor’s police and fire pension “fix,” which allows Chicago to extend the timeline of its pension payments to the funds by 15 years to 2055 from 2040. Now, the plan moves forward – and it will cost Chicago taxpayers an additional $18.6 billion over the next 40 years.

While the law reduces some of the short-term financial pressure on the city, it will only burden Chicago taxpayers in the long run, while offering no real retirement security for the city’s police and firefighters.

Worst of all, delaying the pension payments sets Chicago taxpayers up for massive tax hikes. The law calls for Chicago to automatically begin raising property taxes in 2020 to pay for the postponed contributions.

The looming property-tax hike comes as residents are already struggling with a record $700 million hike in property and other taxes that’s supposed to help the city pay for contributions to the police and fire pension funds.

The law will also push Chicago’s police and fire pension funds even closer toward total insolvency. Combined, these pension systems have less than a quarter of the funds they need now in order to pay out future pension benefits.

This “fix” of Rahm’s, as well as the recent deal the city struck with the laborers pension fund, which exchanges higher city contributions for negligible reforms, is a sad reminder of just how far Emanuel has fallen from his initial reform-minded persona.

When Emanuel was elected, everyone expected him to take on the big reforms – to not let Chicago’s fiscal crisis “go to waste.” Emanuel would be the one to finally take on the unions and enact the pension and spending reforms former Mayor Richard M. Daley had avoided.

But after more than four years in office, Emanuel has abandoned real reform. Now he’s taking the easy way out by sending the bill to taxpayers.

Unfortunately, that bill is staggeringly high and will exact a terrible cost on city residents.

Even with the new police and fire law, laborers deal and a $700 million dollar tax hike, Chicago isn’t close to fixing the massive crises facing the city’s municipal, police and fire pension systems or the collapsing Chicago Teachers’ Pension Fund.

A report by Moody’s Investors Service shows taxpayer contributions to city-worker pension systems are going to rise significantly over the next 15 years – and the mayor is likely to seek billions in additional tax hikes to pay for those contributions.

Instead of enacting phony fixes that only delay payments and passing massive tax hikes that only serve to burden residents, it’s time the city focused on passing real reforms that can help fix the pension crisis in the long run.

Positive reforms for the city include moving all new city employees into 401(k)-style plans, offering optional 401(k)-style plans to current workers and freezing city-worker salaries.

In addition, Chicago should end teacher pension “pickups” – under which Chicago Public Schools pays for a majority of its teachers’ required employee pension contributions as a special benefit.

Those are the sorts of reforms Emanuel advocated in his early days as mayor. To save Chicago, he must begin demanding them once again.