Pritzker’s pension problem, charter chatter, and an abundance agenda victory

This week’s happenings on three big issues in Chicago.

This week saw major moves on three topics of interest for readers of The Last Ward. They include:

1. A pension sweetener bill on Illinois Gov. JB Pritzker’s desk that would plunge Chicago deeper into financial distress.

2. Real momentum toward passing a city charter for Chicago.

3. A big win for the (unofficial) Chicago abundance agenda.

Let’s get into it.

Pritzker’s pension problem

Chicago is home to the worst-funded pension plans in the nation. That debt is the single biggest drain on tax dollars that could otherwise go toward education, social services, or public safety. It’s also the main driver of the city’s endless cycle of tax and fee hikes.

A bill now on Gov. JB Pritzker’s desk would make the pension problem much worse. It adds $11 billion in pension liabilities for Chicago police and fire, costing the city $60 million next year and $753 million in 2055.

But Chicago Mayor Brandon Johnson hasn’t said a word about it. So it was refreshing to hear outgoing Illinois comptroller and potential Chicago mayoral candidate Susana Mendoza speak out against the bill this week.

Paris Schutz: Speaking of financial decisions that could impact the city, the governor has on his desk a bill that would increase pensions for the so-called Tier 2 police and fire employees. And according to some analysis from the Civic Federation, that’s going to cost billions … up to $750 million a year by 2055. How can the city afford another unfunded liability like this?

Mendoza: Let me be the first to say that I love the police. My brother’s a police officer. I want to see them be able to [get] their pensions … But when we take what is already a woefully underfunded pension system at 25% funding and do this, which really truly is unaffordable right now, from a 25% worst-in-the-nation funding level to an 18% funding level, what that really means is if we want to be truthful with people is that it might go completely insolvent. I don’t know how you recover from an 18% funding level. If we were in a better fiscal condition then we could argue let’s do these things. We definitely want to help our police, our firemen, our frontline folks. We love them. But I also want to make sure that when they retire, their pensions are there for them.

Mendoza’s answer was excellent. Frontline workers aren’t to blame for this disaster. Lawmakers are. And they can still choose not to make it worse.

More leaders should follow Mendoza’s example.

She was joined by the Wall Street Journal editorial board, which weighed in against the bill. The Journal also published a must-read piece this weekend by Ed Bachrach and Ted Dabrowski on the bill. An excerpt:

The Chicago bill increases pension benefits for city police and firemen hired after 2010, so-called Tier 2 workers …

The changes to Illinois’s dismal pension situation won’t end there. Does anyone believe the Chicago Teachers Union won’t demand the same increased benefits for its Tier 2 members? What about state teachers? University workers? The tens of thousands of local government employees across the state? That’s how this whole “boost pensions” mess started. Chicago’s police and firefighters supposedly deserve bigger benefits because Tier 2 public safety workers downstate got similar increases a few years ago. Count on all the other public unions to demand the same in the name of “fairness”—and for lawmakers to oblige…

The state doesn’t have the financial capacity to handle higher pension costs. Chicago, whose local governments are mired in billion-dollar deficits for the foreseeable future, definitely doesn’t. Yet the pension sweeteners passed both houses of the General Assembly with veto-proof majorities, including unanimous votes from Republicans. Now it’s up to Mr. Pritzker either to veto or to own this pension malpractice.

According to sources in City Hall and Springfield, some Chicago lawmakers are afraid to speak up about this issue because they fear backlash from the firefighter’s union.

The union makes three arguments in favor of the sweeteners. But all of them fall short.

Argument No. 1: We have to comply with federal “safe harbor” rules. The IRS requires non-Social Security pension plans to provide benefits at least as generous as Social Security. But this is a red herring. Illinois lawmakers haven’t shown Tier 2 violates safe harbor. The IRS has never enforced a violation. And even if compliance is needed, this bill goes far beyond what’s necessary.

Argument No. 2: Downstate public safety workers already got the sweetener. This just levels the playing field. Chicago can’t afford it. And when factoring in salaries and benefits, Tier 2 police and fire in Chicago still come out ahead of their downstate counterparts. The prevalance of this “me too” logic is exactly why this bill should be rejected, as Bachrach and Dabrowski highlight in their piece.

Argument No. 3: Well, what’s your solution then? There are plenty of opinions on what a pension grand bargain should look like. But here’s one principle everyone can agree on in the meantime: first, to do no harm. This bill violates that principle.

The first step out of the pension hole is to stop digging. This bill digs deeper. Pritzker should veto it.

One step closer to a city charter

Chicago is the only big city in the U.S. with no city charter, which is a kind of constitution.

That lack of structure has cost the city dearly, which we discussed at the Chicago Policy Center’s symposium on city charters at Northwestern University’s Pritzker School of Law earlier this year.

A resolution introduced this week in City Council urges the Illinois General Assembly to pass legislation empowering Chicagoans to adopt a city charter. It already has 15 co-sponsors. (Check to see if your alderman is on board here.)

This is the first resolution of its kind in modern Chicago history.

Kudos to these Council members for their leadership.

Abundance agenda victory

The (unofficial) Chicago abundance agenda included eight reforms to make housing more affordable.

Two meaningful reforms from that list were on the City Council’s docket this week: legalizing accessory dwelling units (ADUs) citywide and eliminating parking minimums for new housing construction near public transit.

Before the vote on parking minimums, the Illinois Policy Institute’s LyLena Estabine gave compelling testimony.

Chicago City Council ultimately passed the bill eliminating parking minimums. Congratulations to all the local YIMBY advocates who worked on this ordinance, which will unlock a major boost in housing production at no expense to taxpayers.

The ADU ordinance was deferred and published, which means it will come up for a vote at the next City Council meeting in September. Contact your Council member here and tell them to support it.

In the news

I joined The Mincing Rascals podcast on WGN this week to discuss FEMA, Jeffrey Epstein, the Pritzker pension bill, Emmy nominations, and more. Listen here. My green light recommendation: Go to Millennium Park this Monday (July 21) to see the legendary Novos Baianos play their first-ever Chicago show. Opening for them: the great Joe Bataan.