Retiree Health Care Benefits Commission and “Pension Reform” Updates
As many of you are aware the retiree health care agreement reached in the “Korshak Settlement of 2003” is expiring June 30, 2013. The Retiree Health Care Benefits Commission, or RHBC, was established to make recommendations as to the plan design, costs and all other issues relating to retiree healthcare benefits after its expiration on June 30, 2013. A member of the Commission is Will L. Irving, who is the City Pension Funds’ representative and an elected member and Vice President of the Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund of Chicago.
Mr. Irving has kept the Police Pension Board current on the work of the commission. The recommendations were supposed to be issued by December 30, 2012. This was communicated to our Board as a whole and directly to me by Amer Ahmad, the City Comptroller and Chairman of the RHBC. We are still waiting on the recommendations and the clock is ticking. To make sure everyone was aware of his position before the official recommendations were issued, Mr. Irving issued his, and thus the Funds’, proposed recommendations in a letter to the other RHBC Board Members. Mr. Irving “strongly recommend(s) that the parties to the 2003 Settlement Agreement extend all of the pertinent terms and conditions of the existing 2003 Settlement Agreement for an additional ten year period, or until June 30, 2023, subject to: (i) reasonable and up-to-date modifications to said terms and conditions; (ii) the passage of supplementary necessary legislation by the Illinois General Assembly relating to the Funds’ required subsidies; and (iii) continued retention of judicial jurisdiction as set forth in subsection V B.7 of the 2003 Settlement Agreement for purposes of fair, objective and equitable enforcement to the benefit of all parties.”
While the above sounds very reasonable and beneficial for the 35,000 city retirees, it does not mean that those are the recommendations that will be adopted by the RHBC and issued to the Mayor. As said above, the clock is ticking, and an injunction may need to be sought so our retirees are not left without health care on July 1, 2013. As the Funds eagerly await the recommendations, we must be prepared to act decisively and quickly if needed to protect our membership.
“Pension Reform” stalls in the lame-duck session of the Illinois General Assembly
The General Assembly was hoping to pass legislation during the lame duck session in early January. They adjourned without calling for a vote. While our Fund was not the subject of any proposed legislation, we have to be vigilant on all pension bills. Most of the time, the bills that are proposed for the State Funds are a sneak peak at the game plan to attack our Fund as well.
The main reduction to the State Funds benefits was two fold. One bill was going to require annuitants to choose cost of living increases, COLA’s, or retiree health care, but they could not have both. Also, a bill wanted to shift the cost of downstate and suburban teacher’s pensions to those school districts, a savings to the State of two billion dollars a year.
While most of the “pension reform” is based on the State systems, it is harbinger of things to come for us. As of now, it is status quo for our Fund and we are in a wait and see position.
Sgt. Brian Wright
Pension Board Representative
New Website – FIRST RESPONDER PENSION FACTS
We are a group of Chicago Police Sergeants and Lieutenants dedicated to preserving the pension we have worked for. We welcome help, feedback and support from First Responders, their friends and families.
GENERAL ASSEMBLY SUSPENDS EFFORTS TO CUT GOVERNMENT EMPLOYEE PENSIONS!
The General assembly finished its regular session on May 31st without passing SB512, which sought to undermine pension benefits for current Government workers. As of today, the Legislature needs to get a 3/5 vote to pass this bill in the veto session in October; or if the leaders call a special session before the veto sessions begins. In the last two weeks the, “Illinois is broke” coalition spent boatloads of money on media ads trying to force a vote on SB 512. The measure was not successful this time though due to more than 80,000 calls and 100,000 emails by Government workers to their State Senators and Representatives, objecting to the bill. There was not a vote on SB 512 and the bill was put back into committee.
This is a huge victory for all Illinois government employees and shows that if we continue to work together, we can protect our Pensions.
Sgt. Michael Lazzaro
Pension Fund’s web site: www.chipabf.org.
State Budget Cuts: Starting at the Top
By: Dean Baker Monday February 7, 2011 10:25
The elite media are on yet another jihad. They are determined to cut the pay and benefits of public-sector workers who can still enjoy a middle-class lifestyle.
The idea that a schoolteacher or highway worker can retire with a pension of $2,000-$3,000 a month is directly at odds with their view of government. They believe that government exists to redistribute income from everyone else to those who already are rich and powerful. To these people, the money that is going to pay the wages and pensions of ordinary workers is money that could be in the pockets of the rich.
The economic crisis caused by the collapse of the housing bubble has created a great opportunity. State and local tax revenues plummeted as employment fell. Lower property values also meant lower property taxes. This meant that governments across the country suddenly faced severe budget shortfalls. This provided the opportunity to attack the pay and pension packages of public-sector workers.
It is difficult not to admire the brilliance of this attack. The country’s elite, with the Wall Street high rollers at the forefront, wrecked the economy through a combination of incompetence, greed and outright fraud.
As tens of millions of workers are still struggling with unemployment, underemployment and underwater mortgages, this gang now turns around and starts demanding that middle-income workers take pay cuts and give up part of their pensions. This is like a child setting fire to his parents’ house and then complaining because dinner isn’t ready on time. But this is the way America now works, with the spoiled children on Wall Street calling the shots. . . .
While there can be no doubt that many states face a serious budget squeeze as a result of the economic crisis, that doesn’t mean that we have to join their attack on teachers, firefighters, and other public workers. Instead, we can go right to the top.
Most public-sector workers get paid no more than their private-sector counterparts, but there are, nonetheless, a small number of very well-paid public employees. The Boston Globe recent reported on the 6,400 state employees in Massachusetts who earn more than $100,000 a year. Topping the list was a professor at the University of Massachusetts Medical School who earned almost $800,000 in 2009.
According to the Chronicle of Higher Education, there were 11 presidents of public universities who earned more than $700,000 in the 2008-2009 academic year. The top earner on this list was the president of Ohio States University who pulled down more than $1.5 million. That’s a lot of pension years for custodians or schoolteachers who are supposed to take big cuts to help state budgets.
There are many very high earners in the public sector if we look in the right places. Before we make a schoolteacher sacrifice part of the $25,000 pension that she worked for, maybe the president of Ohio State University should have his pay cut to less than $1 million.
We already know the counterargument: these people will go somewhere else if they didn’t get their huge salaries. For the most part, this is probably not true, but in the cases where it is, there will be little loss to the state. After all, there are plenty of extremely bright, hardworking people who still consider $200,000 a good salary. Besides, aren’t the budget cutters demanding that government will have to change; what better way to start than getting rid of some overpaid prima donnas?
This is not the only place to look for budget savings at the top. One reason that state pension funds have less money than they should is that they often overpay the people who manage their funds. This is not always an accident.
Wall Street honcho and former Obama adviser Steve Rattner agreed to pay $10 million to settle charges that he had made payoffs to public officials to get control of a portion of New York State’s pension fund assets. It is likely that public officials outside of New York have also been willing to sell off control of pension fund assets.
It doesn’t take many sleazy deals like this to add to real money. Suppose that corruption added an average of 0.5 percent to the management fees of public pension funds. If this is the case, then excessive Wall Street fees are costing public pension funds almost $15 billion a year.
States could prevent this sort of corruption by putting tight restrictions on management fees, requiring that they match the lowest cost in the industry. (Vanguard will manage index fund for around 0.15 percent of the value of the assets.) Perhaps, they should also require that all contacts between pension fund agents and bank representatives be videotaped and posted on the web so that everyone can know what sort of arrangements were made. Preventing Wall Street rip-offs could go a long way toward making up pension shortfalls, while bringing greater efficiency to the country’s financial sector.
We should never forget that the bulk of states’ budget problems are the result of the economic crisis brought on by Wall Street greed and incredibly bad economic policy. As much as possible, we should be trying to make the people at top pay for the damage they have caused. It makes no sense to beat up on schoolteachers, firefighters, and other public-sector employees, who have to work for a living.
Emanuel Says He Favors Reduced Pensions for Current City Workers, Not Just New Hires
By DAN MIHALOPOULOS
January 9, 2011
In contrast to his main rivals in the mayor’s race, Rahm Emanuel has told labor leaders that he favors reducing pension benefits for the city’s existing work force and not just for new hires.
Although Mr. Emanuel has not yet publicly detailed his plan to confront the city’s perennial budget deficits and the severely underfinanced employee pension funds, he told union officials in a private meeting on Dec. 15 that he thought it could be necessary to cut the pensions of all employees, said people who attended the meeting.
Mr. Emanuel made the comments while he was being interviewed by leaders of the Chicago Federation of Labor. That umbrella group for 300 unions has not yet endorsed any of the candidates who will be running in the Feb. 22 election to succeed Mayor Richard M. Daley, who is retiring.
“The sticking issue for all of us is the pension issue,” said a labor activist who attended the meeting with Mr. Emanuel. “I can’t tell my members we are going to support a guy who is going to cut your pensions.”
The labor leader and others who attended the meeting said they did not want to be identified for fear that Mr. Emanuel would retaliate if he were elected.
Mr. Emanuel plans to disclose his position on city finances in a speech sometime in February, said Ben LaBolt, his spokesman. Told of the union officials’ accounts of the endorsement session, Mr. LaBolt said, “Rahm told the truth about the financial conditions of the pension system and the crisis that it faces.”
In a statement, Mr. LaBolt added that Mr. Emanuel believed “fundamental reform” was necessary to ensure that workers would receive pension benefits when they retire.
“Rahm knows – and Chicagoans understand – that the pension system as currently constructed is not an honest system,” Mr. LaBolt said. “It’s not fair for taxpayers, and it’s not fair for city workers.”
Public employees’ retirement funds have been hit hard not only by the weak economy but also by early-retirement offers, wage increases and the Chicago Public Schools’ partial “pension holiday,” which has allowed the district to reduce its pension contributions.
A new state law will require Chicago and other cities in Illinois to contribute more money toward pensions for police officers and firefighters. Mr. Daley strenuously objected to that change, warning that it would result in the biggest property tax increase in Chicago’s history.
State lawmakers also approved changes last year that limit pension benefits and raise the retirement age for new public employees, but that legislation did not affect workers already on the payroll.
The mayoral candidates Miguel del Valle, Carol Moseley Braun and Gery Chico have said they favor a two-tier pension system with reduced benefits only for new hires.
“I just don’t think it’s right for current employees contracted under certain terms to be told, ‘No, that’s not going to happen,’.” said Mr. del Valle, the city clerk, adding that he believes doing so would violate the State Constitution.
Pension Reform Bill (SB3538)
- No change in employee contributions
- Maximum benefit will be 75% of final salary at 30 years of service.
- Final average salary is defined as “the average monthly salary obtained by dividing the salary of a police officer during the 96 consecutive months of service (last best 8 years)of 120 months of service and age 55 years of age.
- Maximum salary for 2011 is $106,800.00 and increased each year by 3% or 1/2 of CPI-U, whichever is less.
- Survivor’s annuity benefit will be 66 2/3% of deceased employees salary at time of death.
Full text of the bill. (PDF)