CN April 24, 2014

 

 

If you’ve ever felt confused about how we all got into this pension mess and how the fixes will affect you, this show might help you understand it.  Spoiler alert: you’ll pay more if you’re a taxpayer and you’ll get less money in your pension check if you are, or plan at some time to become, a retiree.

“This is one of those little public charades that’s been going on for decades”, says Crain’s Chicago Business columnist Greg Hinz. “We’ve known for a very long time that we, the state the city, the county, the CTA, the Board of Education, have not been putting enough money into retirement systems to pay the promised benefits.”

Hinz tells the story of how,  in the early 2000s, there was about 75 cents available for every dollar needed. But benefits kept rising, the stock market crash took away value, no additional money was invested, and suddenly the crisis is real. Today, there are pension plans before the Legislature and the City Council, but the question remains about their constitutionality until the Illinois Supreme Court weighs in. Only then will the rules be clear about whether pension benefits can be cut.

“That’s the threshold question,” says Hinz. “Can you reduce benefits as part of the bigger package. If you can’t, then you’re back to square one, and we the taxpayers are gonna take it.”

“The Mayor’s plan, that he says is the fair plan, is going to raise property taxes, a vote that the City Council will have to take – and they just can’t wait to take that vote,” explains Tribune City Hall reporter John Byrne. “And at the same time he’ll be cutting benefits for the laborers and municipal pension funds, freezing COLAs and things like that down the road. This is just clearly a drop in the bucket compared to the stuff he’s still facing with fire and police pensions and the teachers’ union.”

Mark Brown, Sun-Times columnist, says the Constitutional amendment supposedly guaranteeing pension benefits was really important to union leaders.

“For one, they always thought that this constitutional guarantee was their backstop,” Brown explains. “So…if they let it slide, well, in the end they’ll have to make us whole. There are actual situations where the unions said, OK, skip the pension payments. Or we’ll go along with, – Daley put in this reduced formula for paying in. They didn’t stop paying, they changed the law. It’s all very legal. They changed the law so they didn’t have to pay in as much every year under the fiction that that would be enough. Well, it wasn’t enough.”

“The unions didn’t start talking about it because in part, they wanted the money for raises,” Hinz claims. “Some money that could have gone to pensions went to raises. And now the due bill’s being presented at a time when everybody in the private sector has, for the most part, waved bye-bye to their pensions. So the question is – how long can the public sector hang on to a pension, and if they can hang on, how bad is the deal gonna be?”

And, says Hinz, the unions didn’t fight the “pension holidays” and contribution reductions aggressively. “All this was in public.” he says. “Everybody knew about it. Do you remember outraged press conferences by union leaders in the early 2000s demanding that the situation be reversed and that the money go here? No. The unions kind of tacitly winked at it.”

“There’s gonna have to be some sort of new revenue, clearly, and the Mayor is putting all his eggs in the property tax basket,” he continues. “He is saying an income tax is a no-go as far as he’s concerned, and of course Governor Quinn is saying the property tax is a no-go.”

Then, of course, there’s the role our former Mayor played in creating this mess.

“Daley set a time-bomb trap for (Emanuel),” Brown asserts. “He set hundreds of them actually. But he set this one that you’ve gotta take care of the police, fire and  teachers’ pensions before the end of this year or get the Legislature to let you put it off. And he tried that last year and the Legislature said, no way, man.”

So if there’s to be additional revenue, it likely has to come from property taxes. Proposals for garbage collection fees, income taxes, transaction fees and the like have all met with fierce opposition. Even a proposal to close many of Chicago’s TIF funds really wouldn’t have much long-term effect, according to Byrne.

“The TIF, because of the way it’s got to be distributed after you pull stuff out of it, it’s almost like a one-time thing, because it will go to schools, it’s gonna go to other things, and it’s gonna get sucked up pretty quickly.”

Even a casino, the panel agrees, won’t bring in a significant amount of money, since consumers have many casinos to visit today, and under the present proposal Chicago would split any profits 50-50 with the State.

So it’s back to property taxes.

“We in Chicago, whether we want to admit it or not, pay relatively low property taxes,” says Hinz, a sentiment that’s echoed by Brown, who lives outside the City and pays far higher taxes.

The takeaways? Greg Hinz says that you can count on your property taxes to go up if you live in Chicago. Citing Loius XIV, he explains that “The art of taxation is to pluck the goose that squawketh the least.”

And finally: “Nobody here is a saint. Everybody here is wearing grey.”

On other topics, can Toni Preckwinkle beat Rahm Emanuel? Yes, all the panelists say.

“She could,” says Byrne. “There’s a lot of dissatisfaction with the Mayor. The African American community in particular is deeply dissatisfied with the Mayor. And there are lakefront liberals who are also unhappy with the Mayor who Preckwinkle would certainly appeal to…I think if things broke the right way she could beat him. She certainly has a better opportunity than anybody see I could come up with.”

However, Hinz cautions, “She’d have to depend on the African American Community as her base and there simply isn’t the black vote in this city that there was in Harold Washington’s days.”

Should Illinois, which often describes itself as “broke”, pony up $100 million for an Obama Presidential Library? “No”, say all three panelists.  But politics is a contact sport, and Byrne says taking the vote without Republicans present may have seemed like a foolish move on the part of Democratic leaders, “Unless the Speaker wants the Republicans to now come out and shoot this down to anger African Americans.”

 

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About Ken

Ken's the host of Chicago Newsroom. A former news director, reporter and radio program host, he's also a past Vice President of the Chicago Headline Club.
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