Rauner vetoes bill to shore up Chicago municipal workers pensions

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Mayor Rahm Emanuel and Gov. Bruce Rauner | Sun-Times library

Gov. Bruce Rauner on Friday vetoed legislation designed to shore up the pension funds for city of Chicago laborers and other city workers.

“While I appreciate the effort to address the insolvency of certain pension funds for Chicago’s public employees, the legislation will create another pension-funding cliff that the city does not have the ability to pay,” Rauner said in a statement Friday. “This legislation will result in increased taxes on Chicago residents.”

Adam Collins, Mayor Rahm Emanuel’s chief spokesman, blasted the veto, saying “the people of Illinois deserve better.”

Senate Bill 2437 would have put more money into retirement systems covering some 88,000 city workers, excluding police officers and firefighters, who are covered by separate pension funds. The Illinois House passed the bill in December and it was unanimously approved by the Senate in January.

Rauner had previously said he wouldn’t support the bill without more systemic wide-reaching government pension reforms. He also questioned the use of revenue in the bill, which would resort to the city using property-tax money to fund pensions after it runs out of funds from a new tax on city water and sewer service.

Emanuel was on a spring break trip to Budapest with his family when he learned of the veto.

“The governor continues to make one irresponsible and irrational decision after another, and his veto today is the latest example,” Collins said in a statement. “Instead of helping secure the future of our taxpayers and middle-class retirees, the governor chose to hold them hostage.”

With Rauner’s veto applying to legislation from the 99th Illinois Legislative Session, lawmakers in Springfield — now in the 100th Legislative Session — can’t override the veto.

An identical bill, Senate Bill 14, was submitted by Senate President John Cullerton, D-Chicago, on Jan. 11 and advanced to the House on Jan. 25.

Under that plan, city taxpayers would contribute millions more a year to the municipal workers’ and laborers’ pension funds. To pay for the increased contributions, the City Council approved a new tax on city water and sewer service. Without acting, the Municipal Employees Pension Fund would be left with a gaping hole in 2023 — even after a utility tax is fully phased in — that would require tax increases to honor the city’s commitment to reach 90 percent funding over a 40-year period.

In mid-September, the City Council easily approved the mayor’s plan to slap a 29.5 percent tax on water and sewer bills to save the Municipal Employees pension fund. But the Illinois General Assembly still needed to sign off on employee concessions tied to the deal, as well as the funding schedule for the five-year ramp to actuarially required funding.

The same goes for the mayor’s plan to save the Laborers pension fund, bankrolled by a previously approved, 56 percent tax on monthly telephone bills.

The workers’ concessions call for employees hired after Jan. 1 to become eligible for retirement at age 65 in exchange for an 11.5 percent pension contribution. That’s 3 percentage points higher than employees pay now. Veteran employees hired after Jan. 1, 2011, get to choose between contributing 11.5 percent for the right to retire at 65 or continuing to pay 8.5 percent and waiting until 67 to retire.

The legislation also would require newly elected Chicago aldermen and citywide elected officials to serve longer to achieve the maximum 80 percent city pension.

Chicago Federation of Labor President Jorge Ramirez said the bill Rauner vetoed was a bipartisan solution. The veto, he said, adversely impacts those who “deserve to retire with the dignity that their pensions will provide.”

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