socastcmsRssStartBy Cole Lauterbach and Greg Bishop | Illinois News NetworksocastcmsRssEnd
The state’s pension system is unsustainable and lawmakers in Springfield need to amend the state’s constitution to cut out a clause that protects pensions, Chicago Mayor Rahm Emanuel said Wednesday.
Emanuel, who leaves office in the spring, criticized Illinois’ retiree benefits in a speech Wednesday in front of the Chicago City Council. He said the automatic 3 percent annual pay bumps given to retirees are “raises” rather than cost-of-living adjustments. Emanuel echoed Gov. Bruce Rauner’s call to amend the state constitution to eliminate the pension protection clause.
Under the terms of many of the state’s public pension agreements, retirees receive a three percent annual compounded increase. Emanuel said the annual pay increases were designed to help pensions keep pace with inflation. Automatic raises for retirees don’t make sense when city workers have to take furlough days because of tight budgets, the mayor said.
“If inflation is zero and you’re getting three percent compounded annually, it is not a COLA,” Emanuel said. “If it looks like a pay raise, performs like a pay raise, and results in a pay raise, it’s a pay raise.”
He also called for the legalization of recreational marijuana use and a new Chicago casino. Emmanuel said tax revenue from both should go to pay for Chicago’s pension bill, which will top $1 billion next year.
Emanuel also said lawmakers must change the state’s constitution to allow for reductions to pension benefits when they amend the charter to make way for a graduated income tax rates.
"I believe it would be a fundamentally-missed opportunity if we made our tax system appropriately more progressive but left in place a benefit system that is regressive," he said.
The state’s pension protection clause says that any agreed upon pension benefit, including things like health care coverage, “shall not be diminished or impaired.” Past attempts by both the city of Chicago and the state of Illinois to reduce pension benefits have been shot down after union-led court challenges based on the protection clause.
Chicago’s next pension payment will be more than $1 billion. Illinois’ annual required contribution accounts for more than a quarter of the state’s budget. The state’s unfunded pension liabilities <a href="https://www.ilnews.org/news/state_politics/underfunded-state-government-pensions-liabilities-increase-to-billion/article_6a050414-fcc3-11e8-bf3a-cf7f6985dd5c.html">now total $133.5 billion</a>, a $4.4 billion increase from the previous year despite growing market returns and higher taxpayer contributions.
Gov. Bruce Rauner had previously proposed similar changes to the state’s constitution. Rauner said Wednesday that Emanuel’s support was needed years ago.
“I wish the mayor had been active pushing on reforms that he’s discussing today over the last four and eight years,” Rauner said.
Gov.-elect J.B. Pritzker reiterated his campaign pledge on Wednesday that a "pension is a promise" and that he would work with lawmakers to find a way to pay more into the retirement funds, according to media reports.
Republican Gov. James Thompson signed the three percent yearly compounded raise for retirees into law. Thompson has said that <a href="https://www.chicagobusiness.com/static/section/pensions.html">he likely wouldn’t have signed</a> the legislation had he known how much it would have actually cost.