Chicago Federation of Labor serves up $272 million in cost-cutting options to avert layoffs

The Chicago Federation of Labor on Tuesday served up a cost-cutting smorgasbord with potential to save up to $272 million — more than enough to avert the need for layoffs and, possibly, a $94 million property tax increase.

In 2011, the CFL asked Pennsylvania-based Public Works to find alternatives to then-Mayor Rahm Emanuel’s ultimatum that organized labor choose between work-rule changes and 625 layoffs.

Their report suggested ways to cut the city budget by $242 million, largely by eliminating redundant layers of middle management, improving efficiency and having city employees do work that was being doled out to politically connected contractors.

Now the same firm has a proposal that could save at least $195 million and as much as $272 million.

All the ideas represent “recurring, long-term structural improvements,” though some are only “partial-year savings to allow realistic time for implementation.”

The report focuses exclusively on “efficiency gains” and not “additional revenue sources.” Those could come later.

“Rather than further borrowing, we believe that city taxpayers could be well-served in the long-run by additional short-term revenues,” the report states.

“These could total another tranche of budget solutions of equal magnitude to those presented here. Taken together, we believe significant opportunities remain ... to close the city’s structural budget deficit and obviate the need for continued borrowing.”

The CFL has an ownership interest in the Sun-Times.

By far the largest potential savings — as much as $151.4 million — would be achieved by reining in the city’s $450 million in annual health care costs.

The report recommends that the city: self-insure by engaging an independent third-party administrator and pharmacy benefit manager; implement a mix of “reference-based pricing and direct contracting”; evaluate existing onsite or near-site clinics and direct primary care relationships; and consider implementing a “new, more efficient strategy aligned with work locations.”

“Direct primary care, simply put, is a contractual relationship with a primary care physician and his/her offices’ resources. Primary care physicians ... are held accountable for their performance against key performance measures.”

The report further recommends greater use of telemedicine, post-payment medical bill review and recovery programs to identify “medical billing errors and overcharges” and a $50-a-year bonus to “incentivize” city employees to participate in a wellness program.

The city could also generate up to $4.1 million by “equalizing” health care contributions between union and non-union employees.

Currently, unionized city employees, who comprise 90 percent of the city workforce, pay 1.5% more for single and family coverage than non-union employees.

Other health care savings include $2.75 million by incentivizing spouses of city employees to join their own healthcare plans and $2.8 million by requiring newly hired city employees to participate in PPO plans for “at least the first year.”

The second-largest savings would be achieved by increasing the “span of control” or ratio between “senior/mid-level managers and supervisors and frontline staff.”

The city payroll includes 2,393 supervisors at an annual cost of $270.6 million. The average annual salary and benefits for those bosses is $160,002.

If Chicago had one supervisor for every 10 employees, instead of every seven, the city could save $28.6 million to $43 million, the report states.

If the same 1-to-10 ratio was extended to the Chicago Police Department, the city would save as much as $26 million, the report states.

CPD’s supervisory ranks — including sergeants, lieutenants and captains — total 1,693, at an annual cost of $334.7 million including salary and benefits.

The average annual salary for those bosses is $122,483 — which grows to $197,724 when benefits are factored in.

The report also recommends the city save up to $7 million-a-year by requiring verbal verification that police response is required before police respond to automated burglar alarms.

In 2019, CPD responded to 101,500 activated burglar alarms. National statistics show “real events” make up just 2% to 6% of those alarms, meaning “false burglar alarms wasted CPD resources over 97,440 times” in 2019.

If the Chicago Fire Department imposed $50-to-$200 fines for false fire alarms, the city could save another $256,200, the report states.

Other potential big-ticket savings: $15.9 million by renegotiating information technology leases; $8.4 million by staffing the Office of Public Safety Administration with civilian employees instead of 150 sworn police officers; $4.5 million by renegotiating the city’s towing contract with a clout-heavy company; and $3.2 million by reducing outside legal costs.

To help wipe out a $1.2 billion shortfall caused primarily by the coronavirus, Chicago taxpayers are being asked to absorb a $94 million property tax increase followed by annual increases tied to inflation.

Lightfoot’s pandemic budget also includes furlough days for non-union employees and 350 layoffs for unionized employees.

The mayor has delayed the layoffs until March 1 to give Congress and, now, the incoming Biden administration more time to ride to the rescue.

CFL President Bob Reiter said the federation-funded report proves there is no need for laying off employees and “diminishing desperately needed city services.”

“We look forward to working with Mayor Lightfoot and the City Council on incorporating these ideas into the budget blueprint. Together, we can protect our city services that so many rely on and we can protect the dedicated public service workers who provide them,” Reiter wrote in a text message to the Sun-Times.

“The pandemic has blown a hole in our city’s finances and we all need to come together to find solutions to get us back on track. But, the one thing we cannot do is to inflict devastating workforce cuts on the women and men who continue to sacrifice so much to keep Chicago moving during this ongoing pandemic,” Reiter said.

Ald. Gilbert Villegas (36th), the mayor’s City Council floor leader, applauded the CFL for its suggestions and acknowledged the report could make it more difficult to round up the 26 votes needed to approve the $94 million property tax increase.

“I’m sure a lot of my colleagues are gonna pose questions around this report,” the alderman said.

“If there are some things that are viable that we can take a look at and incorporate into the budget, that could potentially reduce the request for additional revenue.”

But Villegas argued that altering the ratio of supervisors to police officers runs contrary to federal consent decree mandates.

Mayoral press secretary Anel Ruiz said much of the CFL report reflects cost-cutting already implemented by Lightfoot or proposed in her 2021 budget.

“We look forward to continuing this dialogue with our partners in Labor, and to keeping the lines of communication open about elements from the report we could implement as we work to make the difficult but responsible budget decisions necessary to keep Chicago on a path toward long-term growth,” Ruiz wrote in an emailed statement.