Mayor Rahm Emanuel said Thursday he’s hopeful his plan to save the Municipal Employees pension fund will survive a legal challenge where the state’s plan couldn’t and said city retirees will be far better off if he’s right.
Two days after four unions followed through on their threat to challenge the mayor’s plan, citing the same constitutional guarantee at the core of the state case, Emanuel argued that he had no choice but to raise employee contributions by 29 percent and sharply reduce cost-of-living benefits.
“We have to do the tough things, the necessary things so people can know that they’re gonna have a retirement, which they didn’t know before because we weren’t doing and they weren’t doing the tough, necessary things to get the pension systems right,” the mayor said.
“We are both preserving and protecting the pension and doing it in a responsible way that brings both reform and revenue together to solve the problem . . . They’re challenging it, but I know we took on the challenge of under-funded pensions and addressed it head-on in a responsible way.”
Emanuel has argued repeatedly that the Chicago pension reform bill is different from the state legislation because the city changes were negotiated with and agreed to by city unions.
On Thursday, he hammered away at that point.
“Twenty-eight of 31 unions agreed to work with us . . . and 11 of them stood up and said they don’t agree with the lawsuit,” the mayor said.
“I think we were actually preserving [their pensions]. And I know the union leaders who worked with us agree because that’s why they agreed to it.”
The lawsuit was filed by a dozen active and retired city employees and the four unions that represent them: AFSCME Council 31, the Chicago Teachers Union, the Illinois Nurses Association and Teamsters Local 700.
They’re asking a Cook County judge to overturn the bill that saved the Municipal Employees pension fund, citing the same clause in the Illinois Constitution at the core of the state pension reform case: that pension benefits promised to government employees “shall not be diminished or impaired.”
The state pension reform bill was recently overturned by a lower court and is now before the Illinois Supreme Court.
With costly pension changes scheduled to take effect on Jan. 1, the four city unions were not about to wait for that ruling.
The mayor’s plan calls for annual pension contributions for city employees who are not eligible for Social Security to rise by one-half of 1 percent over a five-year period — from 8.5 percent of annual paychecks to 11 percent.
City retirees will also be asked to forfeit compounded cost-of-living adjustments that have been a driving force behind the city’s pension crisis.
Instead of getting annual, 3 percent cost-of-living increases compounded every year, they will get a simple, 3 percent increase or 50 percent of the consumer price index, whichever is less.
And they will get no increase in retirement benefits at all in 2017, 2019 and 2025. In addition, employees will be required to wait two years after retirement before becoming eligible for cost-of-living increases. That’s twice as long as they are required to wait today.
Emanuel initially proposed raising property taxes by $250 million over five years to bankroll the city’s increased contribution to save the Muncipal Employees and Laborers pension funds.
He agreed to substitute a 56 percent increase in Chicago’s telephone tax for the city’s first-year contribution, only after Gov. Pat Quinn balked at a pre-election property tax hike.
What happens if the lawsuit succeeds and the mayor’s plan is over-turned?
“I’m not gonna answer a hypothetical,” Emanuel said Thursday.
“But I do know why the 11 union leaders and more have decided to stand with us on this. It’s because they think we’re doing exactly the right thing by their members, their retirees and also ensuring there will be a retirement check for all the people [who] work.”
By December 2015, the City Council must decide whether to raise property taxes — or find other new revenues — to fund a state-mandated, $550 million payment to shore up police and fire pension funds.
Pension talks with police and fire union are on hold, pending resolution of the state case.