May 24--Mayor Rahm Emanuel on Monday floated a new idea to fix the city's smallest government worker pension system, one that he hopes will become a model to address far greater financial woes in the largest retirement fund.
Under the plan, both taxpayers and newly hired city laborers would pay more toward pension costs, and in return, workers could retire two years earlier.
But the Emanuel administration declined to say precisely how much money such an approach could save, and the mayor does not plan to press state lawmakers for approval during the final scheduled week of spring session.
City officials hope the plan would pass muster with the Illinois Supreme Court, which in March struck down an earlier Emanuel plan aimed at addressing the money shortfalls in pension funds covering laborers and municipal employees.
What "we want is a concrete and sustainable funding path that's not going to get caught up in any legal process, and if there should be some sort of lawsuit on any of this, this is extremely strong, and should not put us in a position of two years of uncertainty like we were" on the previous plan, said Michael Rendina, senior adviser to the mayor.
The Emanuel administration provided an outline of the plan Monday. Starting next year, newly hired employees would pay 11.5 percent of their wages toward retirement, compared with 8.5 percent today. Employees hired from 2011 to 2016 also could opt to pay more into the pension fund, city officials said. In exchange, workers who make the higher pension payments could retire at 65 instead of 67. The plan would not affect people hired by the city before 2011 or laborers who have already retired.
The city would gradually increase how much it puts into the laborers' pension fund, with the aim of reaching 90 percent funding by 2057. To come up with part of the money, Emanuel would spend all of the proceeds from a $1.40-a-month tax hike on emergency services slapped onto all city phone bills in 2014. That boosted city revenue by about $40 million a year.
The administration, however, did not provide a schedule of how payments would increase the next 40 years. City Hall officials also said they don't yet have figures on how much money they expect to save under the proposal. The laborers' fund is about $1.2 billion short of what's needed to pay retiree benefits. It's at risk of going broke in about 11 years.
Joe Healy, business manager for Laborers Local 1092, said the two unions representing city laborers have agreed to the deal, figuring that the extra employee contributions represent an equal trade for retiring two years earlier. But Healy also cautioned that the Laborers' Annuity and Benefit Fund is still reviewing the numbers on the value of the trade-off.
