By: Mark Glennon*
“We’ll worry about fixing the pension in five years and hammer new workers for now.” That’s a pretty fair summary of the plan for LABF (Chicago’s Laborers’ pension) released by Mayor Emanuel’s office yesterday — as far as we can tell from the horribly inadequate information it provided.
Here’s what we know, from piecing together a number of news stories on the plan:
- Taxpayer contributions into the fund will increase over five years to a point where they supposedly become sufficient to bring the fund to 90% funding in 40 years.
- Starting next year, newly hired employees will pay 11.5 percent of their wages toward retirement, compared with 8.5 percent today.
- About $40 million of new revenue coming from the 2014 telephone tax increase will be redirected from a different Chicago pension, MEABF (the Municipal fund), to LABF.
- Some existing employees will be given the option to swap higher contributions for a lower retirement age.
It’s that five-year phase-in towards a supposedly adequate payment that’s the same old can-kicking. Similarly delayed, impossible contribution schedules have been included in most recent “reform” proposals for other pensions. The city is merely saying it will start taking care of the problem later, even under the old accounting standards it’s been using. The city did not provide a funding schedule or a projection of further increases in the unfunded liability, presumably to hide that fact. I assure you that, when we see those, they will show the liability continuing to spike up, and there will be no reasonable hope of ever commencing adequate funding for LABF and the other city pensions.
Even when the supposedly adequate payments begin in five years, the numbers will be phony. The calculation assumes away part of the problem by targeting 90% funding, and is based on all the usual, unrealistic assumptions.
Nor did the city provide any detail on how much that increase in contributions by new workers will reduce the pension hole, though you can safely assume it’s not of much consequence. It will, however, be important to new workers. That’s part of growing trend to sock new workers to try to protect older ones. Most workers around the state hired since 2010 are subject to the “Tier 2” pension reforms, which are a disaster and provide them with inadequate retirement security, as even the General Assembly now recognizes.
Today, LABF is underfunded by $2.5 billion using the new accounting standards now in place. As its recently posted actuarial report for last year showed, that “Net Pension Liability” tripled from the previous year.
This has become a cruel joke. Chicago will deny and delay to the end, helped by the saps in our local press.
Update: Check out this guy who is still on LABF’s board — read this story from 2011 in its entirety. And there’s the $68 million that went to the firm of Robert Vanecko, Richard Daley’s nephew. This is where your telephone tax money will be going, Chicago.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.