THE BLOG

Chicago Pension-Cutting Plan Would Harm City Retirees, Neighborhoods

04/08/2014 05:54 pm ET | Updated Jun 08, 2014

The recent clamor over the city of Chicago's supposed "pension crisis" has drowned out many salient facts. Proponents of the drastic cuts sought by the city have threatened a range of doomsday scenarios if their proposal is not enacted, including untenable cuts to city services or the prospect that retirees could receive no pension at all. Rather than the thoughtful, informed discussion this matter deserves, this is the equivalent of shouting "Fire!" in a crowded theater.

Here are the facts: The pension-cutting legislation backed by the Emanuel Administration would unfairly harm some 50,000 employees and retirees who participate in the city's Municipal Retirement Fund. These are the lowest-paid city workers, including library employees, food-service and janitorial workers in city schools, health care employees, clerical workers and others.

Their average pension today is just $33,000 a year. They aren't eligible for Social Security, so this modest amount is their primary and often only source of income in retirement. And with the city already moving to eliminate their retiree health insurance, many low-income retired city workers are struggling even now to make ends meet.

Under the administration's proposal, the value of the average retiree's $33,000 pension would erode over two decades of retirement to barely $22,000 -- and keep dropping from there. It's uncertain how an 85-year-old retiree could get by on so little, and it's unjust to demand that they do so.

It's also important to note that 60 percent of municipal fund participants are women. Their average pension is even lower --just $27,000 a year today. The administration's bill would reduce their buying power to just $18,000 in two decades -- again, with no Social Security.

These workers and retirees have always paid substantially toward their own retirement -- 8.5 percent of every paycheck. The pension debt is caused primarily by the city's failure to contribute an adequate share.

Slashing the retirement income of seniors who served our city doesn't just harm retirees; it also drains economic activity from neighborhoods where the public-sector workforce is the beating heart of the middle class. Every dollar put into a community in a pension check yields $1.72 in economic activity, mostly in local businesses.

The municipal fund and the other city pension funds for teachers, police, firefighters and laborers do face an underfunding crisis. AFSCME and the other unions in the We Are One Chicago coalition are committed to finding an equitable solution to that crisis. But any solution has to be fair to workers and retirees. And it must be constitutional and developed with the participation and support of all city unions.

There is no doubt that additional revenue must be raised to address the shortfall now and in the future. While we aren't opposed to considering property tax increases as part of any solution, other sources of revenue should also be explored. As the Sun-Times recently reported, the cost of corporate tax dollars diverted to TIF funds has outweighed the cost of pension benefits earned by city employees in recent years. Making certain that large, profitable corporations are paying their fair share is just one example of ways the city can raise revenue and address the pension funding problem without resorting to drastic cuts that hurt city neighborhoods and jeopardize retirement security for tens of thousands.