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* 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.”
posted by Rich Miller
Friday, Aug 8, 25 @ 8:47 am
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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.
Comment by Chicago Friday, Aug 8, 25 @ 8:58 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
Comment by Beans Matter Friday, Aug 8, 25 @ 9:00 am
@ beans
https://civicfed.org/sites/default/files/2023-11/Tier2ExplainerCopy.pdf
Comment by This was incredibly hard to find Friday, Aug 8, 25 @ 9:06 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?
Comment by Pumpsss Friday, Aug 8, 25 @ 9:13 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.
Comment by Juice Friday, Aug 8, 25 @ 9:21 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.
Comment by Three Dimensional Checkers Friday, Aug 8, 25 @ 9:32 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.
Comment by Grandson of Man Friday, Aug 8, 25 @ 9:42 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.
Comment by Jack in Chatham Friday, Aug 8, 25 @ 9:52 am
=-=No longer can people hired at age 18 retire at age 53==
Is that a problem if they do? Jealous much?
Comment by Demoralized Friday, Aug 8, 25 @ 9:57 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?
Comment by City Zen Friday, Aug 8, 25 @ 10:03 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
Comment by May soon be required Friday, Aug 8, 25 @ 10:08 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.
Comment by Flyin' Elvis'-Utah Chapter Friday, Aug 8, 25 @ 10:09 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.
Comment by Jack in Chatham Friday, Aug 8, 25 @ 10:10 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?
Comment by Big Dipper Friday, Aug 8, 25 @ 10:11 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.
Comment by Pundent 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.)
Comment by CT Guy Friday, Aug 8, 25 @ 10:12 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.
Comment by TinyDancer(FKASue) Friday, Aug 8, 25 @ 10:24 am
=Is Martwick advocating for a pay freeze to even things out?=
Martwick will advocate for whatever the unions tell him to advocate for
Comment by Davos Friday, Aug 8, 25 @ 10:32 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.
Comment by Demoralized Friday, Aug 8, 25 @ 10:33 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?
Comment by Stay with me now 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.
Comment by Demoralized Friday, Aug 8, 25 @ 10:34 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.
Comment by Red Ranger Friday, Aug 8, 25 @ 10:43 am
Why is Paul Vallas relevant? The election was over two years ago. It is bananas that people still fall for these talking points.
Comment by Three Dimensional Checkers Friday, Aug 8, 25 @ 10:50 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.
Comment by Rich Miller Friday, Aug 8, 25 @ 10:51 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.
Comment by Rich Miller Friday, Aug 8, 25 @ 10:53 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.
Comment by low level Friday, Aug 8, 25 @ 11:10 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.
Comment by Pundent Friday, Aug 8, 25 @ 11:11 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.
Comment by Brave New World Friday, Aug 8, 25 @ 11:13 am
Pundent,
I’m not Paul Vallas fan, but who do you think can solve this?
Comment by Chelsea Friday, Aug 8, 25 @ 11:14 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.
Comment by Steve Friday, Aug 8, 25 @ 11:15 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.
Comment by Pumpsss 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.
Comment by walker Friday, Aug 8, 25 @ 11:18 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?
Comment by JP Altgeld Friday, Aug 8, 25 @ 11:22 am
===Is this new legislation not a new, additional mandate? ===
Try reading his explanation for why he wrote what he wrote.
Comment by Rich Miller Friday, Aug 8, 25 @ 11:23 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.
Comment by Steve Friday, Aug 8, 25 @ 11:31 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.
Comment by City Zen Friday, Aug 8, 25 @ 11:32 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.
Comment by Pumpsss Friday, Aug 8, 25 @ 11:39 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.
Comment by Pumpsss Friday, Aug 8, 25 @ 11:47 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.
Comment by Three Dimensional Checkers Friday, Aug 8, 25 @ 11:54 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.
Comment by Rich Miller Friday, Aug 8, 25 @ 11:58 am
@RM
It all hinges on this, doesn’t it: ==This is universally accepted as fact.==
I’m not certain that’s an accurate statement.
Comment by JP Altgeld Friday, Aug 8, 25 @ 12:04 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.
Comment by Pundent Friday, Aug 8, 25 @ 12:17 pm
===tier 2 benefits for every police officer and firefighter (except Chicago)===
Teachers, take note.
Comment by Candy Dogood Friday, Aug 8, 25 @ 12:25 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.
Comment by Candy Dogood Friday, Aug 8, 25 @ 12:27 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.
Comment by Three Dimensional Checkers Friday, Aug 8, 25 @ 12:30 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.
Comment by Demoralized Friday, Aug 8, 25 @ 12:35 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.
Comment by Steve Friday, Aug 8, 25 @ 12:39 pm
“Whether a judge steps in and forces a tax increase”
A judge cannot do that.
Comment by Ben Friday, Aug 8, 25 @ 12:42 pm
===A judge cannot do that.===
Don’t kid yourself.
Comment by Rich Miller Friday, Aug 8, 25 @ 12:56 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?
Comment by The Farm Grad Friday, Aug 8, 25 @ 1:26 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.
Comment by Yellow Dog Democrat Friday, Aug 8, 25 @ 1:55 pm