Illinois Senate sends Chicago pension reform bill to governor
By Meaghan Kilroy
January 10, 2017 1:25 pm | Updated 3:20 pm - Pensions & Investments
The Illinois Legislature approved Monday a bill to help shore up Chicagofs
municipal and laborer pension funds.
The measure passed the Senate by a 41-0 vote on Monday, the first day of the
two-day lame-duck session. It passed the House by a 91-16 vote Dec. 1, the final
day of the fall session.
The bill is intended to improve the pension plansf funding ratios to 90% each
by 2057 through increased city contributions and higher contributions for
certain employees.
The bill increases the payroll contributions for participants of both pension
funds hired after Jan. 1, 2017, to 11.5% from 8.5%, and reduces their age of
eligibility for full benefits to 65 from 67. Employees hired on or after Jan. 1,
2011, will have the option of increasing their payroll contributions to 11.5%
from 8.5% in return for their retirement age being reduced to 65 from 67. There
would be no changes for employees hired prior to 2011.
The bill also requires that the city begin making contributions on an
actuarial basis to both pension in 2023. Revenue received from a 2014 increase
in the cityfs emergency phone surcharge and a new water and sewer tax would help
cover the increase in the cityfs contributions.
The $4.6 billion Chicago Municipal Employeesf Annuity & Benefit Fund had
$18.6 billion in liabilities as of Dec. 31, 2015, for a funding ratio of 24.7%,
according to its most recent annual report. The $1.2 billion Chicago Laborersf
Annuity & Benefit Fund has a funding ratio of roughly 45%.
Chicago Mayor Rahm Emanuel applauded the billfs passage in a statement
Monday: gWith todayfs action, both the House and Senate have acted in a
bipartisan manner to pass SB 2437, which is a responsible plan that will secure
the retirements of city employees and retirees while protecting Chicago
taxpayers. I thank both chambers for codifying the local solution we have
achieved in partnership with labor.h
While the reforms are a step in the right direction, more needs to be done to
ensure the pension plansf long-term solvency, said Laurence Msall, president of
the Civic Federation, in an e-mailed statement. gMayor Emanuel and his team have
made great progress in recent years to stabilize the cityfs shaky finances,
including reforms recently passed by the General Assembly aimed at putting the
municipal employeesf and laborersf pension funds back on the path toward
solvency,h he said. gHowever, the reforms are not a panacea, nor are they
certain to be enacted, and the city will continue to face significant financial
challenges that could make it difficult to maintain its commitments in the
future. The city should therefore present a transparent plan for how it will
sustainably fund its pensions and other obligations in the long term while
continuing to provide adequate levels of critical services.h
The Civic Federation an independent government research organization in
Chicago.
A spokeswoman for Illinois Gov. Bruce Rauner could not immediately be reached
for information on whether the governor intends to sign the
bill.