Chicago Unions Divided Over Emanuel’s Move To Gut Pensions

Matthew Blake

The Chicago Teachers Union, led by Karen Lewis (pictured here), is one of the unions opposing the bill cutting Chicago public workers' pensions. (Philadelphia Public School Notebook / Creative Commons)

Faced with a debt cri­sis eeri­ly rem­i­nis­cent of Detroit’s finan­cial straits, Chica­go May­or Rahm Emanuel now wants to slash retire­ment ben­e­fits for city work­ers, who have already seen their pen­sion funds erode from decades of mis­man­age­ment and delayed payments.

Because the state gov­ern­ment has con­trol over Chica­go pub­lic work­er pen­sions, Emanuel’s first fund-cut­ting mea­sures have sur­faced in the form of pro­posed leg­is­la­tion. Last week, Emanuel announced a pro­pos­al to cut city employ­ee retire­ment funds; long­time House Speak­er Mike Madi­gan (D‑Chicago) then wrote it into Sen­ate Bill 1922.

And on Tues­day, the Illi­nois leg­is­la­ture passed that bill, which calls for a com­bi­na­tion of raised rev­enue streams and ben­e­fit cuts to ensure that the city’s retire­ment sys­tem for munic­i­pal employ­ees and labor­ers — just 35 per­cent fund­ed today — will be 90 per­cent fund­ed by 2055. The pro­pos­al would affect the pen­sions of 56,000 city work­ers affil­i­at­ed with 31 dif­fer­ent unions.

Despite the hit to their mem­bers’ pen­sions, 28 out of those 31 unions sup­port the bill. 

The largest of these, SEIU Local 73, rep­re­sents about 9,500 city employ­ees, includ­ing cus­to­di­ans, secu­ri­ty offi­cers and traf­fic con­trol aides. While union lead­ers weren’t exact­ly thrilled by the leg­is­la­tion, many thought it was best to accept the deal before the pro­posed cuts grew even more severe.

At first, SEIU Local 73 was offi­cial­ly neu­tral on the bill, but a last-sec­ond amend­ment pro­tect­ing cost-of-liv­ing adjust­ments, or COLA, for low-income retirees con­vinced the union to back SB1922, Local 73 Spokesper­son Adam Rosen says.

Rosen notes that cred­it rat­ing agency Moody’s has Chica­go bonds two notch­es above junk” sta­tus. With the sit­u­a­tion grow­ing worse, he says, We would nev­er have had an agree­ment as favor­able as the one we have in this bill.”

Oth­er unions in sup­port includ­ed those rep­re­sent­ing small build­ing trades shops, like Heat and Frost Local 17 and Sprin­kler­fit­ters Local 281. These unions have large­ly stayed out of the fierce debate — they have not, for exam­ple, held pub­lic events or issued any press state­ments sup­port­ing Emanuel’s proposal.

Mean­while, the three unions staunch­ly opposed to the bill are heavy hit­ters in Illi­nois labor: The Chica­go Teach­ers Union, AFSCME Coun­cil 31 and the Illi­nois Nurs­es Association.

Though teach­ers’ pen­sions will remain intact, CTU still rep­re­sents thou­sands of work­ers, such as teacher aides, who will be affect­ed by the cuts — and offi­cials think com­pro­mis­ing was a bad move. Asked about the pos­si­bil­i­ty of sup­port­ing Sen­ate Bill 1922, CTU Polit­i­cal and Leg­isla­tive Direc­tor Stephanie Davis-Gates respond­ed, That was stu­pid. We’d nev­er accept any­thing like that.”

SB1922 man­dates that city work­ers, many who now pay 8.5 per­cent of their salary toward their pen­sion, con­tribute an extra 2.5 per­cent to the fund from their annu­al earn­ings. Also, retirees must for­go some annu­al cost-of-liv­ing adjust­ment, or COLA, increas­es, though the afore­men­tioned amend­ment sup­port­ed by SEIU Local 73 guar­an­tees that retirees get­ting $22,000 a year or less will retain a larg­er por­tion of their COLA bumps.

Emanuel has assured work­ers that he won’t aban­don them. Part of his plan to replen­ish these pen­sion funds, which is not in the state bill, is to raise city prop­er­ty tax­es by $50 mil­lion each year over the course of five years.

Robert Bruno, direc­tor of the Uni­ver­si­ty of Illi­nois-Chica­go labor stud­ies depart­ment, notes that the tax increase dis­tin­guish­es Emanuel’s pro­pos­al from Illi­nois’ land­mark law gut­ting state employ­ee pen­sions. The may­or deserves cred­it for say­ing you have to address this as a rev­enue prob­lem,” Bruno says; by con­trast, Illi­nois Sen­ate Bill 1 sim­pli­fied the pen­sion deficit into a mat­ter of work­ers sim­ply receiv­ing too much in ben­e­fits and not giv­ing enough in contributions.

But the Chica­go City Coun­cil must approve the tax hike. And although it has approved most of Emanuel’s ordi­nances dur­ing his three-year tenure, a major tax increase has not yet been on the table. 

Per­haps a big­ger obsta­cle for the leg­is­la­tion, how­ev­er, is Illi­nois Gov. Pat Quinn, a Demo­c­rat run­ning for re-elec­tion on a plat­form that includes prop­er­ty tax rebates. Aware of the prop­er­ty tax hike it will like­ly trig­ger, Quinn hasn’t signed or vetoed the bill; he may take up to 60 days before doing so. 

For its part, SEIU Local 73 hopes Quinn sides with Emanuel. After a rocky start prompt­ed by the mayor’s fir­ing of dozens of traf­fic con­trol aides in August 2011, the union feels the pro­pos­al rep­re­sents Emanuel’s will­ing­ness to com­pro­mise. We have been able to work with him and nego­ti­ate on issues, and we believe work­ing togeth­er is the way to keep this city and pub­lic work­ers on the right track,” Rosen says.

CTU isn’t buy­ing it, though. It’s vowed to sue Emanuel if SB1922 becomes law, cit­ing a state con­sti­tu­tion­al pro­vi­sion against the dimin­ish­ment of con­trac­tu­al­ly agreed-upon pen­sion ben­e­fits — the same con­sti­tu­tion­al pro­vi­sion that is the basis of the state work­er pen­sion law­suit cur­rent­ly mak­ing its way through Illi­nois courts. A union fact sheet con­tends that COLA cuts in SB1922 mean that a retiree get­ting $33,000 a year (the aver­age annu­al pen­sion in the munic­i­pal employ­ees’ fund) would see their ben­e­fit in 20 years reduced to $22,500 in 2014 dollars.

Even as city employ­ees feel the strain of cuts, oth­er pub­lic ser­vants’ retire­ment funds have remained steady for now. For fis­cal year 2015, the city must pay $184 mil­lion toward the munic­i­pal and labor­er retire­ment funds. Mean­while, Chica­go will pay a whop­ping $1.58 bil­lion total toward the teacher, police and fire­fight­ers’ sys­tem. At this point, it’s anyone’s guess what adjust­ments Emanuel will pro­pose for these funds.

Davis-Gates says that CTU has talked with the Board of Edu­ca­tion about a teacher pen­sion bill and has not met with the may­or. How­ev­er, the union’s rela­tion­ship with Emanuel has only grown more tox­ic since the sev­en-day Sep­tem­ber 2012 teach­ers’ strike, and it is not clear what com­pro­mise can be reached.

The retire­ment secu­ri­ty of Chicago’s police offi­cers and fire­fight­ers is also a great unknown. The Fra­ter­nal Order of Police Lodge 7 elect­ed a new pres­i­dent, Dean Ange­lo, Sr. in the last month. Accord­ing to an FOP rep­re­sen­ta­tive, the new lead­er­ship is still being de-briefed on pensions.

Calls to Chica­go Fire­fight­ers Union Local 2 were not returned on Thurs­day. That union has also repeat­ed­ly sparred with Emanuel, but announced a ten­ta­tive con­tract this week, fol­low­ing the pre­vi­ous agree­ment laps­ing in July 2012. The ten­ta­tive deal report­ed­ly does not include agree­ments on pen­sion matters.

In the mean­time, both CTU and AFSCME Coun­cil 31 demand the may­or look beyond prop­er­ty tax­es for the des­per­ate­ly need­ed city rev­enue, such as instat­ing a city income tax. In 2011, a city audit con­clud­ed that a 1 per­cent tax on res­i­dents’ income could net Chica­go $500 mil­lion a year.

How­ev­er, Emanuel called an income tax a non-starter” at a press con­fer­ence Wednes­day. One [rev­enue idea] that I reject is the idea of a city income tax,” the may­or said. That’s not the right way to go.”

Full dis­clo­sure: AFSCME is a web­site spon­sor of In These Times. Spon­sors have no role in edi­to­r­i­al content.

Matthew Blake is a free­lance jour­nal­ist based in Chica­go. He has writ­ten for the Chica­go Jour­nal, Wash­ing­ton Month­ly, Wash­ing­ton Inde­pen­dent and The Nation, among oth­er publications.
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