Looks like, with pension legislation having been passed and signed in Springfield, Chicago is next in line for “reform”.
But WBEZ’s political reporter Alex Keefe just dug into the history of Chicago’s funds and discovered what he calls “a uniquely quirky piece of math”. It’s a multiplier that’s used to calculate how much money the City has to pay into funds like those for Police and Fire, and as Keefe explains, “if something happens that changes the amount of money going out the door, the multiplier stays the same, and it hasn’t increased since 1982.”
Those “somethings” include incentives for early retirement, which the City used often in recent years. It reduces the payroll, but shifts the burden to the pensions. And then there’s the Baby Boom Problem. For the first time, more people are leaving the system than coming in, so the system is stressed in so many ways.
“This has been around a long time,” Keefe insists. “People have known about this and have been documenting it and making a lot of noise about it for decades and decades. I was sitting down with the secretary of the Chicago Firefighters pension fund. And he has these old handwritten books. And we’re talking 1924 and 1927 they’re sending letters to Springfield saying, hey, guys, this pension math you have is wacky. We’re gonna go broke by 1930. And we need you to increase, and change the way you fund pensions.”
But wait, there’s more. In order to pay the pension bills, Chicago’s funds have been selling off their investments, making them even poorer. “Since 2000, the rate at which Chicago’s four pension plans has been liquidating their assets has tripled. Last year, they cashed out a billion dollars in investments,” Keefe says.
You can see Keefe’s solid report here.
So Office Depot has decided that, forced to chose between Naperville and Boca Raton for their new HQ, and given that the State of Illinois didn’t come up with any tax breaks to entice them to stay – they’re outta here.
Shortly afterward, House Speaker Mike Madigan, who rarely makes quotable public statements, said the following:
“I find it very difficult to support tax giveaways for corporate CEOs and millionaire shareholders whose companies pay little in state taxes. I question our priorities when corporate handouts are demanded by companies that don’t pay their fair share while middle-class families and taxpayers face an increasing number of burdens.”
Pretty radical stuff.
“If only he were telling the truth,” laments Don Washington of Mayoral Tutorial.
“Eighty percent of the money that the State of Illinois raises in taxes comes from ordinary citizens,” he says. “Nine percent comes from our corporate citizens and the rest comes from fees, according to the State of Illinois. I’d just like it to be, heck, if it was 50/50 that’d be nice.”
“Why does he bring this up now?’ asks Keefe. “It wasn’t that long ago that he was calling a special session to talk about gargantuan tax breaks for CME and Sears. And the only thing I can think of is – because he lost. Because Office Depot went to Boca Raton.”
Tom McNamee, Editorial Page Editor of the Sun Times, says he thinks there was another factor. “I think the Archer-Daniels Midland effort to get a tax break rubbed him the wrong way,” he says, “because the amount they’re looking for is so minuscule compared to what they actually do in business. It’s almost like we want to get a tax break just to get a tax break. And the idea that they would either pick up and leave the state or not move their corporate headquarters to Chicago just seemed rather ludicrous. At some point it just seems that a corporation is asking for a tax break just because they can.”
And McNamee says all of these discussion are being shaded by a sobering reality. “This general sense of the widening gap between the haves a and the have-nots,” he says.”That’s for real…no one can deny that there’s a growing gap between the wealthy and the rest of us.”
A Sun-Times reader recently pointed out (and McNamee later verified) that the CEO of McDonald’s earns $9,000 an hour. It would take one of his minimum-wage-earning restaurant workers 3-1/2 months to earn what the CEO earns in an hour.
There are good reasons, he says, for arguing for an increased minimum wage. But it isn’t a panacea, and there are convincing arguments that there is a point at which a minimum wage floor can actually harm the economy.
We close the show with speculation about what the Supreme Court will do with the pension plan they’ve been handed.
“The question is, will they resolve it on its merits, or politically? And the Illinois Supreme Court is a political body. The question for me is what will be the calculation in whatever they do? They may say, on the one hand, it’s not constitutional, but on the other hand, we need to do this. That may be the way they look at this. “