STUMP » Articles » Chicago's DAY OF DOOM! » 24 July 2015, 09:09

Where Stu & MP spout off about everything.

Chicago's DAY OF DOOM!  


24 July 2015, 09:09

But before I get to that, thanks to my top referrers:



Today, the ruling on the Chicago pension reform is supposed to come down.

City Hall is bracing for a ruling Friday on whether Mayor Rahm Emanuel’s plan to scale back pension benefits for city workers and laborers passes legal muster.

Should a Cook County judge toss out the changes, taxpayers ultimately could end up paying hundreds of millions of dollars more into the two retirement funds because government employees would get their full benefits restored and have to pay less toward their retirement.

At issue is a 2014 state law Emanuel pushed through the legislature that aimed at shoring up the financially imperiled pension funds by reducing cost-of-living increases, raising the retirement age and requiring workers to kick in more money. The city also would pay more into the retirement funds, and Emanuel came up with some of that money by raising 911 phone fees by $1.40 a month.

The worker and laborer funds are short about $9.5 billion of what’s needed to meet future obligations and are at risk of going broke within 13 years.

Retired workers and unions sued, citing a clause in the Illinois Constitution that holds government pension membership “shall be an enforceable contractual relationship, the benefits of which shall not be diminished or impaired.”

Let me remind you of the result of prior Illinois pension reform cases:

Can Illinois reduce COLAs and make state employees contribute more to pensions? Or make any change to the pensions except upward.


Can Illinois change some of the terms of retiree health coverage, which everybody says should be doable as the dollar amount value of this benefit will still increase?



I mean come on. We knew the answer last year.

Most obviously: the various pension reforms tried on various levels in Illinois are dead.

Nobody is arguing that new entrants’ pensions/benefits cannot be changed. But that’s not where the trouble is coming from. It’s from an ever-ratcheting upward set of benefits for those who have been working for Illinois governmental bodies for decades and for those who are already retired.

I am not digging into the details here, but the way I am interpreting the ruling is that the benefit in question is having 50% of one’s health insurance premiums covered. Not a specific dollar amount (inflation-indexed, even). Health care cost inflation has been higher than general inflation rates for decades:

And that’s just the total costs. This is not the insurance bit. And given required coverages in Obamacare, I wouldn’t be surprised of the health insurance inflation rates are much higher than the health costs inflation rates.

So if the state cannot cut a benefit that can fluctuate wildly from year-to-year, if the state cannot change a percentage of coverage, even if they’re paying more every year in absolute or inflation-adjusted dollars, then there’s no way the pensions, which are less variable, will be allowed to be cut.

To be sure, Cook County may punt, but when it gets to the Illinois Supreme Court?

So have fun Chicago. I assume you already have your press releases ready for the inevitable result.

UPDATE: Denied. Easiest prediction ever.

Compilation of Chicago posts.

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