Gov. J.B. Pritzker on Monday signed a bill supporters say puts Chicago firefighter pensions on par with suburban and downstate systems, but which detractors led by Mayor Lori Lightfoot argue will increase pension costs and could lead to property tax hikes.
The measure, approved in the Illinois Senate during the legislature’s January lame-duck session, does away with what its sponsor, Democratic state Sen. Robert Martwick of Chicago, called “one of the oddest quirks of pension law.”
Previously, a Chicago firefighter born on or after Jan. 1, 1966, would receive a non-compounding annual 1.5% cost-of-living adjustment to his or her pension, with a lifetime limit of 30%. Firefighters born before that date got a 3% annual increase.
Outside the city, firefighters hired before 2011 receive annual 3% compounding increases to their pensions, while those hired in the past decade receive a less generous increase.
The new law removes the Chicago pension differences based on date of birth, and also eliminates the 30% cap on cumulative cost-of-living adjustments.
Martwick said that instead of paying the smaller increases to the younger generation of Chicago firefighters, the city came to the legislature every few years to push the cutoff birth date forward — while continuing to base its contributions on the lesser amount. That has led to perpetual underfunding of the pension system, he said.
As of 2018, the system was only 18.4% funded, with unfunded liabilities totaling more than $5 billion.
“If we ever hope to right our financial ship, we must finally put an end to the irresponsible behavior that put us here in the first place,” Martwick said in statement. “This law simply ensures that the city confronts the true costs of its pension obligations and makes the difficult decisions it needs to make today.”
Martwick said the new law is not a benefit enhancement. “For 45 years, the city has given every firefighter a higher benefit than was written into the law. This change makes the law comply with those four decades of practice to ensure the city budgets the appropriate amount for that benefit,” he said.
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Lightfoot and business groups urged Pritzker to veto the bill, arguing that the cost to taxpayers would be too high.
Lightfoot sent a letter to aldermen on April 1 urging them to oppose the bill. She said it would double pension costs by $18 million to $30 million each year.
“If the governor does not veto this bill, the city will have to find a means to address the increased cost since the legislation does not provide a way to pay for these increase costs,” Lightfoot wrote.
“During the 2022 budget season, it will then fall on the members of the City Council to make difficult decisions to pay for these additional costs.”
She said “the obvious revenue solution, another property tax increase, would cost an addition $12-14 for the owner of a $250K home each and every year.”
A similar bill related to police pensions would spike Chicago’s annual costs by $57 million to $96 million a year, Lightfoot said.
Others have raised concerns about the matter with the governor.
In a letter to Pritzker in February, Chicagoland Chamber of Commerce President and CEO Jack Lavin argued the change would lead to another property tax increase for city homeowners and businesses.
“This comes at a time of significant uncertainty due to the pandemic and economic crisis,” Lavin wrote. “Our economic recovery will be slowed, job growth stalled, and fiscal instability continued. We will not get people back to work.”
Pritzker on Monday said the state’s as yet unsuccessful efforts to sell the Thompson Center in the Loop is one solution for alleviating the pension payment problem.
The sale “will return to the city’s property tax rolls and is projected to generate $45 million annually for the city and its sister agencies,” the governor said in a statement.