The Illinois Legislature approved Monday a bill to help shore up Chicago’s municipal and laborer pension funds.
The measure passed the Senate by a 41-0 vote on Monday, the first day of the two-day lame-duck session. It passed the House by a 91-16 vote Dec. 1, the final day of the fall session.
The bill is intended to improve the pension plans’ funding ratios to 90% each by 2057 through increased city contributions and higher contributions for certain employees.
The bill increases the payroll contributions for participants of both pension funds hired after Jan. 1, 2017, to 11.5% from 8.5%, and reduces their age of eligibility for full benefits to 65 from 67. Employees hired on or after Jan. 1, 2011, will have the option of increasing their payroll contributions to 11.5% from 8.5% in return for their retirement age being reduced to 65 from 67. There would be no changes for employees hired prior to 2011.
The bill also requires that the city begin making contributions on an actuarial basis to both pension in 2023. Revenue received from a 2014 increase in the city’s emergency phone surcharge and a new water and sewer tax would help cover the increase in the city’s contributions.
The $4.6 billion Chicago Municipal Employees’ Annuity & Benefit Fund had $18.6 billion in liabilities as of Dec. 31, 2015, for a funding ratio of 24.7%, according to its most recent annual report. The $1.2 billion Chicago Laborers’ Annuity & Benefit Fund has a funding ratio of roughly 45%.
Chicago Mayor Rahm Emanuel applauded the bill’s passage in a statement Monday: “With today’s action, both the House and Senate have acted in a bipartisan manner to pass SB 2437, which is a responsible plan that will secure the retirements of city employees and retirees while protecting Chicago taxpayers. I thank both chambers for codifying the local solution we have achieved in partnership with labor.”
While the reforms are a step in the right direction, more needs to be done to ensure the pension plans’ long-term solvency, said Laurence Msall, president of the Civic Federation, in an e-mailed statement. “Mayor Emanuel and his team have made great progress in recent years to stabilize the city’s shaky finances, including reforms recently passed by the General Assembly aimed at putting the municipal employees’ and laborers’ pension funds back on the path toward solvency,” he said. “However, the reforms are not a panacea, nor are they certain to be enacted, and the city will continue to face significant financial challenges that could make it difficult to maintain its commitments in the future. The city should therefore present a transparent plan for how it will sustainably fund its pensions and other obligations in the long term while continuing to provide adequate levels of critical services.”
The Civic Federation an independent government research organization in Chicago.
A spokeswoman for Illinois Gov. Bruce Rauner could not immediately be reached for information on whether the governor intends to sign the bill.