By: Mark Glennon*

 

How could a city that seems so prosperous be so broke? Why the big tax hikes?

 

Aside from pensions, the most obvious reason is average pay increases far beyond inflation. Those excess pay increases account for over half of Chicago’s proposed $588 million property tax increase. And as for pension benefit hikes exceeding inflation, well, you better sit down.

 

Let’s look at just police and fire salaries. Suppose average pay was the same today as in 1985, adjusted upward only for the Consumer Price Index. Understand that this is average salary across the city, and these salaries do not include overtime. Chicago has been paying out almost $200 million of that:

 

Average salary today in the police department is $89,000 per year. In 1985 it was $33,000, which is $72,000 in today’s dollars.

Average salary today in the fire department is $92,000 per year. In 1985 it was $31,000, which is $68,200 in today’s dollars.

 

Multiply out that excess of actual salaries today over what they would be had we stuck with a 1985 base, increase it for inflation, then multiply that by the number of police and fire employees today. You get $312 million per year. That’s over half  of the proposed property tax increase, just looking at police and fire. Chicago has other workers whose pay increases outpaced inflation but they, on average, have lower salaries and their historical numbers are not available.

 

Were salaries in 1985 fair and should we have stuck with that base? You can decide that for yourselves as well as anybody.

 

Now, those over-inflated salaries are pensionable, driving up pension benefits as well. That factor, along with other increases in pension benefits, make for some really crazy comparisons to inflation-adjusted 1985. Specifically:

 

Average annual police pension payment today is $60,000. In 1985 it was $13,000, which is $28,600 in today’s dollars

Average annual pension in the fire department is $70,000 per year. In 1985 it was $14,000, which is $30,940 in today’s dollars.

 

In other words, the average police pension is up 362% and the average fire pension is up 400% since 1985. After adjusting for inflation, the have increased by over two times the rate of inflation, or about 120%.

 

What’s the total effect on pensions? Payouts from the police pension zoomed from $50 million in 1985 to $560 million last year. Payouts from the fire department jumped from $26 million to $208 million. That’s despite Chicago’s population dropping over nine percent since 1985, and the number of workers declining a bit as well.

 

Those numbers came from the most recent actuary reports for the firefighter and police pensions. We put most of them in tables we published last week, but the impact didn’t seem to sink in. They explain much of how Chicago went broke.

 

*Mark Glennon is founder of WirePoints. Opinions expressed are his own.

Updated 9/27 to correct the line on fire department pension (which earlier said “salary”) and clarifying what is inflation adjusted.

 

 

 

 

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Anonymous

Interesting. A comparative for values and changes over time in an effectively governed state (Indiana?) would also be illustrative.

Rex he Wonder Dog!

But my bigger question is, what is the average pay for that patrolman I see out on the street, without averaging in all the command staff?
Of course you know Doug, at least for CA; it is $200K, before OT is added in. And lets not forget, it is still a GED job, where family and friends are the first ones hired.

S Moderation Douglas

“In other words, the average police pension is up 362% and the average fire pension is up 400% since 1985.”

Is my math correct? After inflation, police pensions are up 120% (a little over double.) And fire is up 126% (over double, again.)

(I assume that second line should be: “Average ‘pension’ today in the fire department is $70,000 per year.)

mark glennon

S Moderation- Yes. Looking at it your way, inflation adjusted police pension would be about 29,000 and fire would be about 31,000. The averages today are in fact 60,000 and 70,000. So, they are both up over 2X over inflation (around 120%).

And thanks for pointing out that error in the wording. I fixed it, and added some language making clearer what is inflation adjusted, and noted the update.

Rex the Wonder Dog!

Is my math correct? After inflation, police pensions are up 120% (a little over double.) And fire is up 126% (over double, again.)

I think Glenn said that was “inflation-adjusted”;

Now, those over-inflated salaries are pensionable, driving up pension benefits as well. That factor, along with other increases in pension benefits, make for some really crazy comparisons to inflation-adjusted 1985.

S Moderation Douglas
In 1983 I was working a traffic accident and talking to the city police officer on scene. It came up that he made about ten percent more than I (highway maintenance worker.) I thought that wasn’t much for the responsibility of his job. In the mid 2000s, I recall California Highway Patrol getting a three year contract with about a thirty percent raise over and above cost of living. There were a lot of police and fire raises about that time. (Post 9/11 ?) But my bigger question is, what is the average pay for that patrolman I see out on the street, without averaging in all… Read more »
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