* Forgotten in all the talk about the new pension change for Chicago first responders is this Tribune story from June…
Lead sponsor Sen. Robert Martwick, a Chicago Democrat, told the Tribune the tweaks were a negotiated fix agreed to by Mayor Brandon Johnson and Gov. JB Pritzker that was promised to both bring parity between Chicago and downstate first responders and help bridge a shortfall in benefits for employees hired after 2010. […]
Dave Sullivan, a lobbyist for the Fraternal Order of Police Lodge 7, wrote in the union’s monthly newsletter that several years ago Pritzker called “personally to assure me that he would make Tier 2 parity … a reality,” and he looked forward to the governor’s signature. […]
Martwick said Johnson “understood a promise was made. I give him credit” for living up to it. “He continues to show — unlike so many of his predecessors — a willingness to solve the problem and consistency in terms of living up to those steps” to do so.
* I reached out to Sen. Martwick yesterday. His full response…
Rich,
Much hyperbole has been written about the recent Chicago police and fire pension legislation signed by Gov. Pritzker. I thought I’d send a quick note to help clear up the misinformation and provide some context.
1. Tier 2 pension benefits for public sector employees do not meet the federal requirements under the “safe harbor” provision. This is universally accepted as fact.
2. Failure to meet safe harbor could lead to employers being on the hook for not only the pension benefit promised, but also having to provide full social security benefits for those employees, without the benefit of having ever paid into the system. This would be catastrophically expensive. As such, it is also universally accepted that the wise course it to adjust the benefits to satisfy the law before we are in violation.
3. In 2019, tier 2 benefits for every police officer and firefighter (except Chicago) were improved as part of the deal consolidating their investments. The benefit changes were heavily negotiated and designed to satisfy safe harbor so as to prevent the huge cost associated with failure. At the time, the same benefits were promised to Chicago police and fire.
4. Actuarial analyses of this benefit change indicate that while this benefit change will “by and large” satisfy safe harbor, there still exists limited circumstances where certain employees will still fail. As such these actuaries suggest that limited benefit improvements may still be necessary in the future.
5. The changes recently passed to Chicago police and fire pensions are the exact same benefits granted to first responders across the state. This means that they do nothing more than solve the tier 2 problem.
Many have opined recently about this. Let me be very clear. Any increase in benefits will put strain on a city whose finances are already problematic and whose pension systems are already woefully underfunded. There is no way to avoid that fact, but that is the worst reason for inaction. The notion that we should delay the fix is to suggest that ignoring the problem will somehow make it go away.
The fact is that this debt and obligation to pay it exists whether we passed this legislation or not. Passing it only makes it transparent and forces everyone in government to acknowledge it and devise a plan to pay for it.
In all the years that I have worked on pensions I have learned a few absolute truths. First, every attempt to fix pensions costs money and so it is never convenient to do any fix “today.” However if you don’t fix it today it will be exponentially more expensive and harder to accomplish tomorrow and again, even harder the day after. In the 80s and 90s Paul Vallas skipped pension payment after pension payment (either for the city when he was budget director or at CPS when he was CEO), causing the massive accumulation of debt Chicago suffers with today. We should never ever seek to repeat that irresponsible decision making. Governor Pritzker made not only the right decision, but unequivocally the most financially responsible decision when he signed this bill. Remember, this change was coming one way or another. As such, acknowledging it sooner means that the city can pay for it now instead of later, and that always provides the best protection for our valued first responders at the lowest possible cost to the taxpayer. I dare anyone to prove me wrong.
One last caveat. S&P recently opined negatively about this, suggesting this legislation conferred benefits more than the bare minimum needed to solve the tier 2 problem. Again, this is divorced from the realities of democratic governance. As I stated previously, this change is not perfect. It solves the problem, but still might need further adjustment, meaning it actually falls short in some instances. Clearly, it is not excessively over generous. Additionally, it was heavily negotiated with all stakeholders. S&P suggesting that only the bare minimum is acceptable is folly. Negotiations produce the best outcome achievable, and this bill does exactly that. I am confounded that an institution that preaches financial responsibility would suggest that continued debt accumulation that makes any solution even more expensive would be better than addressing the problem in a way that at worst is only slightly less than “ideal.”
- Chicago - Friday, Aug 8, 25 @ 8:58 am:
So while there’s lots of talk about pension help, Sully gets it done again. Nice to see a good guy’s success continue for his clients. And he does have some interesting ones.
Good for Martwick to try to set the record straight.
- Beans Matter - Friday, Aug 8, 25 @ 9:00 am:
On what data points/actuarial analysis is Senator Martwick basing his statement that TierII benefits do meet Social Security minimums…I may have missed it and would like to see it
- This was incredibly hard to find - Friday, Aug 8, 25 @ 9:06 am:
@ beans
https://civicfed.org/sites/default/files/2023-11/Tier2ExplainerCopy.pdf
- Pumpsss - Friday, Aug 8, 25 @ 9:13 am:
Funny that the bill didn’t solve the safe harbor issue permanently so that the cops can come back in a few years to ask for more benefits as part of another safe harbor fix. The debt and the obligation didn’t exist until martwick put it into law. Yes, there was a promise, but the state used to do these benefit enhancements incrementally in the past to make them manageable from an employer cost standpoint. Martwick knows the fix costs money but yet did not include the money in the bill to pay for the fix. Come on…Increasing benefits is the easy part. Where is the courage to pay for them?
- Juice - Friday, Aug 8, 25 @ 9:21 am:
Pumpsss, the incremental benefit increases, particularly when you know that you are going to do them, become more expensive the longer you wait to get it on the books.
If there were a rolling funding schedule, that would not necessarily be the case. But because the amortization schedule is a set date (2055), having more years of assumed investment gains to cover a benefit is a better deal for the taxpayers, even if the shorter term increases are more noticeable.
- Three Dimensional Checkers - Friday, Aug 8, 25 @ 9:32 am:
The Mayor has made it clear over and over again. He just does not believe he has an obligation to tell the public the truth about his administration and what they are doing.
- Grandson of Man - Friday, Aug 8, 25 @ 9:42 am:
It’s better to bite the bullet and fix things earlier. The opposite is the story of Illinois.
“Vallas skipped pension payment after pension payment”
He’s a perfect fit for the IPI, ILGOP and the rest of the phony debt criers.
- Jack in Chatham - Friday, Aug 8, 25 @ 9:52 am:
Tier II was not all taken backs; there were a few gives. This is an inconvenient fact. For example, widows receive 75% of their spouses pension benefits rather than 50%. Also, if inflation is over six percent the annual increase is greater than the traditional formula. Veterans are able to buy four years rather than two years of service. I have heard about this safe harbor but never seen a spreadsheet. I doubt the spreadsheet supports the argument that Tier II is inadequate. What people hate is the age of retirement has been raised; the Rule of 85 is gone. No longer can people hired at age 18 retire at age 53.
- Demoralized - Friday, Aug 8, 25 @ 9:57 am:
=-=No longer can people hired at age 18 retire at age 53==
Is that a problem if they do? Jealous much?
- City Zen - Friday, Aug 8, 25 @ 10:03 am:
==Paul Vallas skipped pension payment after pension payment (either for the city when he was budget director or at CPS when he was CEO), causing the massive accumulation of debt Chicago suffers with today==
No one was complaing when the big raises were flowing freely. Those raises weren’t possible unless CPS skipped those pension payments. Is Martwick advocating for a pay freeze to even things out?
- May soon be required - Friday, Aug 8, 25 @ 10:08 am:
===@ beans
https://civicfed.org/sites/default/files/2023-11/Tier2ExplainerCopy.pdf
===
This says that the only change needed is to increase the salary limitation
- Flyin' Elvis'-Utah Chapter - Friday, Aug 8, 25 @ 10:09 am:
Jack in Chatham-
There are reasons people hired at 18 can retire at 53.
Go work 30 years as a cop, correctional employee, or mental health worker and you (might) understand.
You’re not selling insurance or working at a bank.
Tier II is the main reason these jobs are hard to fill and retain.
Working more than three decades in these professions for a pension that will make one lower middle class aint quite the draw the framers of Tier II thought.
- Jack in Chatham - Friday, Aug 8, 25 @ 10:10 am:
Dear Demoralized, if people retire at 53 there are fewer years of pension contributions and more years of pension payments. That is part of the reason for the imbalance of funds and pension shortfalls. Raising the minimum age to collect a pension has been a positive development funding wise for the pension systems. It is not about emotions, jealousy or envy-mongering but having cash in the bank so checks don’t bounce.
- Big Dipper - Friday, Aug 8, 25 @ 10:11 am:
How many 18-year-olds do state and local governments hire, what positions are they qualified for, and as their pensions would be based on salary what do those positions pay?
- Pundent - Friday, Aug 8, 25 @ 10:12 am:
= I have heard about this safe harbor but never seen a spreadsheet.=
Google it. It’s not as if the Safe Harbor Provisions were made up. The state is under no obligation to do your homework for you.
- CT Guy - Friday, Aug 8, 25 @ 10:12 am:
==== if inflation is over six percent the annual increase is greater than the traditional formula. ===
Tier 2 annual increase is capped at 3% (also important note that the annual increase is only off the original base year amount and NOT an increase from the previous year.)
- TinyDancer(FKASue) - Friday, Aug 8, 25 @ 10:24 am:
= In the 80s and 90s Paul Vallas skipped pension payment after pension payment (either for the city when he was budget director or at CPS when he was CEO), causing the massive accumulation of debt Chicago suffers with today. =
Exactly. And don’t forget the risky bonds.
- Davos - Friday, Aug 8, 25 @ 10:32 am:
=Is Martwick advocating for a pay freeze to even things out?=
Martwick will advocate for whatever the unions tell him to advocate for
- Demoralized - Friday, Aug 8, 25 @ 10:33 am:
==It is not about emotions, jealousy or envy-mongering==
That’s exactly what it’s about. It is more than reasonable for people to retire in their 50’s after they have provided years and years of service. I will have worked for 32 years and will retire when I’m 56. I could not care less about your feelings on the matter. I will have provided plenty of service to the State of Illinois and frankly if you and your ilk don’t like it you can go pound sand.
- Stay with me now - Friday, Aug 8, 25 @ 10:34 am:
= - May soon be required=
= This says that the only change needed is to increase the salary limitation=
Does that not confirm Martwicks assertion that currently tier two benefits are not complying with safe harbor?
- Demoralized - Friday, Aug 8, 25 @ 10:34 am:
==so checks don’t bounce==
And also, no checks are going to bounce. You’ve bought into the notion hook, line and sinker that if the pensions aren’t 100% funded right this second that the system is going to collapse. Retirement payments will continue to go out. There is absolutely no danger of that not happening.
- Red Ranger - Friday, Aug 8, 25 @ 10:43 am:
I think this will be the model for the “Tier II fix”
Every couple of years another group will get taken care of. Teachers next? A total Tier II fix will be an enormous fiscal note, but if you do it bit by bit, people really wont notice all that much outside of the Trib, Crains and the IPI. Not great fiscal policy, fantastic political strategy.
- Three Dimensional Checkers - Friday, Aug 8, 25 @ 10:50 am:
Why is Paul Vallas relevant? The election was over two years ago. It is bananas that people still fall for these talking points.
- Rich Miller - Friday, Aug 8, 25 @ 10:51 am:
=== Retirement payments will continue to go out===
Per the constitution, those payments have to be made, even if it requires cuts elsewhere.
Also, don’t forget (because much of the news media seems to have done so) that the city was granted a casino license mainly to help fund first responder pensions. The mayor needs to expedite this as fast as he possibly can.
- Rich Miller - Friday, Aug 8, 25 @ 10:53 am:
===I think this will be the model for the “Tier II fix”===
This is gonna sound crass, but the only reason it passed with such huge margins is because it had zero state fiscal impact and was essentially an agreed bill.
So, that’s why I don’t buy into the slippery slope argument at all. Too many other state spending pressures out there.
Maybe take a step back and look at the whole picture before making these bold predictions.
- low level - Friday, Aug 8, 25 @ 11:10 am:
Many thanks to Senator Martwick for the explanation and you for the posts, Rich. I now have a much better understanding of the dynamics at work with this bill.
- Pundent - Friday, Aug 8, 25 @ 11:11 am:
=Why is Paul Vallas relevant?=
Because we can count on Paul to continue to cast himself as the ultimate fixer who’s been called upon to run again. Having periodic reminders of the havoc he wrought is actually a good thing. It keeps him from having the opportunity to do it again.
- Brave New World - Friday, Aug 8, 25 @ 11:13 am:
Demoralized - maybe you should avoid policy discussions if you’re always going to get so emotional. You haven’t got this unhinged since discussing your State Farm policy. Take a breath.
- Chelsea - Friday, Aug 8, 25 @ 11:14 am:
Pundent,
I’m not Paul Vallas fan, but who do you think can solve this?
- Steve - Friday, Aug 8, 25 @ 11:15 am:
-Is that a problem if they do? Jealous much?-
This all really isn’t a question of jealousy or math. The voters have spoken. Martwick doesn’t really have to explain anything. The voters voted for a certain benefits package that will be funded by taxes via their representatives. That’s that. Who’s going to lose their job as a politician over this in Illinois? Probably no one.
- Pumpsss - Friday, Aug 8, 25 @ 11:18 am:
@Demoralized
Last time there was a major recession, state and local pension funding fell by 28%. Chicago police fund is now 18% funded. If something like 2008 happens again, the city could struggle to get payments out the door. Not saying they won’t, but saying it could be a real challenge.
- walker - Friday, Aug 8, 25 @ 11:18 am:
“”Martwick will advocate for whatever the unions tell him to advocate for”"
Oh, a random shot missing the imaginary target.
I’m guessing you don’t know Martwick at all. He’s about meeting obligations without wasting money for the long term.
- JP Altgeld - Friday, Aug 8, 25 @ 11:22 am:
==he fact is that this debt and obligation to pay it exists whether we passed this legislation or not.==
Is this new legislation not a new, additional mandate?
- Rich Miller - Friday, Aug 8, 25 @ 11:23 am:
===Is this new legislation not a new, additional mandate? ===
Try reading his explanation for why he wrote what he wrote.
- Steve - Friday, Aug 8, 25 @ 11:31 am:
No one was tricked or conned . The voters have spoken on this issue. Sure it’s a lot of money with long term implications. That’s the democratic process.
- City Zen - Friday, Aug 8, 25 @ 11:32 am:
==Retirement payments will continue to go out.==
Yep. It’s called pay-as-you-go. Instead of pension payments being sourced primarily from market gains, they’ll come directly from the current year’s budget.
Back in the 70s and 80s, the state used to only contribute enough to the pension systems to cover what was coming out. Of course, it was easier back then because the number of active workers far exceeded the retired ones. That’s not true anymore.
- Pumpsss - Friday, Aug 8, 25 @ 11:39 am:
@walker
If that’s the case, then why let the city continue underfunding the police pension fund? That costs a ton of money long-term. Your argument assumes the city will make the full payments for the new benefit increases. The statute and history says they won’t. Not only did the cost increase but now it will increase with interest due to legalized underfunding.
- Pumpsss - Friday, Aug 8, 25 @ 11:47 am:
And if we are truly doing this to be transparent and reflect the true liabilities, why not actually fix the safe harbor issue permanently to allow the city to plan for what actually needs to be paid? This was political. Plain and simple.
- Three Dimensional Checkers - Friday, Aug 8, 25 @ 11:54 am:
===Because we can count on Paul to continue to cast himself as the ultimate fixer who’s been called upon to run again.===
The only time I think about Paul Vallas is when the Mayor’s apologists invoke his name to justify their nefarious ways. Other than as a perpetual boogeyman, he is completely irrelevant.
- Rich Miller - Friday, Aug 8, 25 @ 11:58 am:
===he is completely irrelevant===
Meh.
But the point is not Vallas. It’s what Martwick said he did. Could’ve been Joe Smith. Some of y’all are just using a red herring. Stick to the topic at hand, please.
- JP Altgeld - Friday, Aug 8, 25 @ 12:04 pm:
@RM
It all hinges on this, doesn’t it: ==This is universally accepted as fact.==
I’m not certain that’s an accurate statement.
- Pundent - Friday, Aug 8, 25 @ 12:17 pm:
=This was political. Plain and simple.=
Being political and being responsible don’t have to be mutually exclusive. And the support was bipartisan and unanimous. So there’s that.
- Candy Dogood - Friday, Aug 8, 25 @ 12:25 pm:
===tier 2 benefits for every police officer and firefighter (except Chicago)===
Teachers, take note.
- Candy Dogood - Friday, Aug 8, 25 @ 12:27 pm:
===Back in the 70s and 80s, the state used to only contribute enough to the pension systems to cover what was coming out. ===
“We” and I mean this in the veriest or very royal of wes, We literally changed our state’s constitution in an effort to encourage our state’s government to actually fund our pension system rather than continue the practice that you’re describing.
Illinois, like so much of the world, suffers from people who gave zero corndogs for the future and expect the future to have corndogs to give.
- Three Dimensional Checkers - Friday, Aug 8, 25 @ 12:30 pm:
Sen. Martwick’s response is chock full o’ buzzwords, seemingly to to distract from a simple truth — the law does more than what was necessary to avoid the safe harbor requirements of the Social Security Act.
- Demoralized - Friday, Aug 8, 25 @ 12:35 pm:
==suffers from people who gave zero corndogs for the future and expect the future to have corndogs to give.==
Very nice play on words during fair time. Well done.
- Steve - Friday, Aug 8, 25 @ 12:39 pm:
-Your argument assumes the city will make the full payments for the new benefit increases.-
They will have to . It’s in the Illinois state constitution. Even if they don’t have the money: they still owe the money. Whether a judge steps in and forces a tax increase or not the benefits have to be paid. Other parts of the budget can be cut but not pensions.
- Ben - Friday, Aug 8, 25 @ 12:42 pm:
“Whether a judge steps in and forces a tax increase”
A judge cannot do that.
- Rich Miller - Friday, Aug 8, 25 @ 12:56 pm:
===A judge cannot do that.===
Don’t kid yourself.
- The Farm Grad - Friday, Aug 8, 25 @ 1:26 pm:
“The voters have spoken on this issue”
Susan Mendoza has courageously addressed the pension sweetener. She’s taken the fiscally responsible lane in the upcoming mayoral election.
Will Alexi Giannoulias follow her lead?
- Demoralized - Friday, Aug 8, 25 @ 1:43 pm:
==suffers from people who gave zero corndogs for the future and expect the future to have corndogs to give.==
If he runs for Chicago Mayor then we should care what he thinks. As Secretary of State? Who cares.
- JP Altgeld - Friday, Aug 8, 25 @ 1:44 pm:
==Will Alexi Giannoulias follow her lead?==
He won’t have to say a word. Susana has tried the Mayor thing before and got smoked. He’s in a different category and is aware of that fact.
- Yellow Dog Democrat - Friday, Aug 8, 25 @ 1:55 pm:
I love the people who complain that there are not enough 64 year old Cops and firefighters responding to 911 calls.
Martwick is a consummate grown-up.
Someone tell Republicans that if the bill is so awful, they should not have all voted for it.
- Steve - Friday, Aug 8, 25 @ 2:05 pm:
Remember Kanerva v. Weems, the big Illinois benefits case ? The decision was 6-1. In the 6 where conservatives, moderates , and liberals. That’s that. You don’t have to go to law school. A simple straight forward decision . The Illinois state constitution says what is says about diminishing benefits.
- Johnny B - Friday, Aug 8, 25 @ 2:47 pm:
The Republicans who voted for the bill do not represent Chicago.
They will not have to answer for the 11 billion dollar tax hike on Chicagoans necessary to get pension funding back to the 25% it was last Thursday.
Democrats continue to grow government spending, taxing and borrowing like there is no tomorrow.
How much higher do they think they can possible raise taxes?
The corporate tax is already 2 nd highest
Property taxes are the highest
Gas taxes are the second highest
They ignoring the poll that says 60% of Illinois residents think taxes are already too high
- Rich Miller - Friday, Aug 8, 25 @ 2:49 pm:
===The Republicans who voted for the bill do not represent Chicago===
But Martwick and everyone else from Chicago who voted for the bill does.
- Steve - Friday, Aug 8, 25 @ 3:10 pm:
-The Republicans who voted for the bill do not represent Chicago-
Laws in the Illinois state legislature can pass with zero votes from Chicago. It’s beyond irrelevant . If you have the votes and the Governor signs it: it’s law.
- May soon be required - Friday, Aug 8, 25 @ 3:12 pm:
==Remember Kanerva v. Weems, the big Illinois benefits case ? The decision was 6-1. In the 6 where conservatives, moderates , and liberals. That’s that. You don’t have to go to law school. A simple straight forward decision . The Illinois state constitution says what is says about diminishing benefits.==
All the more reason to be careful increasing benefits.
Maybe someone should ask Martwick what he suggests Chicago cut or what taxes to increase to pay for the additional benefits.
- low level - Friday, Aug 8, 25 @ 3:12 pm:
Hey Johnny B. You must not remember Ronnie Reagan who started the borrowing and spending. News flash: he wasnt a Democrat.
- Pundent - Friday, Aug 8, 25 @ 3:21 pm:
=Susan Mendoza has courageously addressed the pension sweetener.=
Well if you read Martwick’s explanation you would realize how disingenuous it is to call this a sweetener.
Suzanna has a knack for taking courageous stands on laws that are already in the books. It depends on who the audience she’s pandering to at the moment. You may have heard that she’s not a fan of the Safe T Act either (when she’s addressing cops). But I’m sure she’ll reconcile her inconsistent positions with the police and fire fighters before the next election if she chooses to run.
And whether the next Mayor is Suzanna or Alexi they’ll have to deal with the realities of the cities pension obligations whether they like them or not.
- Johnny B - Friday, Aug 8, 25 @ 3:21 pm:
I can see why you are low level
Despite being born in Tampico in 1911 and leaving the state in 1933, Ronald Reagan is not to blame for the billions unfunded liabilities in Chicago and the State of Illinois in 2025
- Demoralized - Friday, Aug 8, 25 @ 3:24 pm:
==Democrats continue to grow government spending,==
So let us all know what you want to cut. Be specific. Because when you ask Republicans all they can come up with is “waste, fraud and abuse.” Ask them specifics about programs and you’ll find they want cuts as long as it’s not something they support. You’re good with talking points.
- Demoralized - Friday, Aug 8, 25 @ 3:26 pm:
==s not to blame for the billions unfunded liabilities in Chicago and the State of Illinois==
And neither are strictly Democrats Mr. Wizard. Do you know any history about this topic or are you simply lazy with only talking points?
- City Zen - Friday, Aug 8, 25 @ 3:43 pm:
==I love the people who complain that there are not enough 64 year old Cops and firefighters responding to 911 calls.==
No, but the life expectancy of the average 20 year old male in 1970 (when the constitutional amendment was signed) is 10 years less than it is today. But that same amendment won’t let us withould an extra 1-2% from the employee to help pay for that extra longevity.
At the core of every Tier 1 public sector pension are assumptions made generations ago.
- Big Dipper - Friday, Aug 8, 25 @ 3:52 pm:
Life expectancy has been declining in the US and hasn’t been this low since 1996, almost 30 years ago. If it continues and reaches 1970 levels again perhaps you will have a party?
- Johnny B - Friday, Aug 8, 25 @ 4:04 pm:
The budget in Chicago has increased by 58% since 2019 an increase of 6 billion dollars.
Think that is sustainable?
You could start by closing some of the CPS schools that are 1/2 empty.
That is about 1/3 of them
Then you reduce all of the extra programs funded with temporary federal money and go back to as close as possible to the 2019 number.
Legal settlements are also way up since 2019
Unchecked Democratic governance allows government unions and trial lawyers to bleed taxpayers dry
- Big Dipper - Friday, Aug 8, 25 @ 4:08 pm:
Um Johnny what kind of debt increase did your party just pass in DC?