Firefighters’ pension bill could cost Chicago taxpayers $3 billion, city official says

Mayor Lori Lightfoot’s administration is sounding the alarm about a pair of firefighters pension sweeteners poised for legislative approval that, mayoral aides warn, could saddle Chicago taxpayers with $3 billion in additional costs.

The companion bills are co-sponsored by Lightfoot’s legislative nemesis, state Sen. Robert Martwick (D-Chicago) and by Sen. Cristina Pacione-Zayas, the progressive champion who will serve as deputy chief of staff to Mayor-elect Brandon Johnson.

They appear to be on a fast track to reach Gov. J.B. Pritzker’s desk during the spring session.

One of the bills would increase benefits for Chicago firefighters hired after Jan. 1, 2011, when Illinois created a two-tiered pension system that reduced benefits for newly-hired workers to chip away at the state’s mountain of pension debt.

Specifically, it would make the annual cost of living adjustment for the most junior Chicago firefighters equal to the full annual increase in the consumer price index. That’s double the current cost of living adjustment, which is either half the consumer price index increase or 3%, whichever is lower.

The second bill would change the final average salary used in calculating a Chicago firefighters pension.

Lightfoot and her Chief Financial Officer Jennie Huang Bennett sounded the alarm about the changes on the same day the outgoing mayor released a “mid-year” budget forecast that claimed the Lightfoot administration was leaving Johnson with a budget shortfall of just $85 million.

“We don’t need a bunch of unfunded mandates for pensions,” Lightfoot said that day.

Bennett called the companion bills “among the largest pension sweeteners in the history of Illinois” with an overall price tag of over $3 billion through 2055. That’s when a Chicago Firefighters Pension Fund that now has assets to cover just over 20% of its liabilities must reach a funding ratio of 90%.

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Pacione-Zayas could not be reached for comment.

Martwick said the two-tiered system violates the Social Security Administration’s so-called “Safe Harbor” provision, which requires that benefits for government employees who aren’t eligible for Social Security must at least match that same level of compensation.

“Imagine police officers or firefighters retiring at 55 and potentially living for 30 more years and having to provide current Social Security benefits to them. Way more expensive than fixing Tier 2. And that is the opinion of people who are far better versed at that than me in terms of the finances of this. That’s why it’s being done,” Martwick told the Sun-Times.

Martwick noted the two-tiered system was fixed for police and fire pension funds outside Chicago when those funds were consolidated as part of a 2019 pension reform championed by Pritzker.

“There isn’t a whole lot of pushback on it because everyone believes it needs to be done,” Martwick said.

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Actually, there is pushback. And it’s not just from the outgoing administration.

The Civic Federation has warned on its website the companion bills would “jeopardize the hard-won financial stability attained over the last several years” by the state and city and “could potentially result in the reversal of recent bond rating upgrades for both governments.”

“For the city of Chicago and other local governments, this could lead to large property tax increases, further burdening homeowners and businesses as Illinois enters into a recession,” the Civic Federation said.

There is “no evidence” pension benefits for newly-hired firefighters would “violate Safe Harbor rules any time soon” nor has there been a cost assessment, the federation wrote.

“Benefit enhancements are likely necessary to meet Safe Harbor requirements, but the solution should be thorough vetted, actuarially sound and the most cost effective of all possible options,” according to the Civic Federation.

The group “urges legislators and the Governor to demonstrate the need for the specific Tier 2 enhancements before taking any binding legislation action. … Until a complete analysis is done, there should be no urgency to pass these supposed Safe Harbor ‘fixes.”

Two years ago, Lightfoot urged Pritzker to veto another Martwick-championed firefighters pension sweetener she claimed would saddle Chicago taxpayers with up $823 million in added costs by 2055.

Pritzker ignored the mayor’s plea and signed the bill.