fact sheet on city meabf-labf proposal
DESCRIPTION
The We Are One Chicago fact sheet on the city's proposal to cut pensions in the municipal employees' and laborers' retirement systemsTRANSCRIPT
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SB 1922 OPPOSE
Unfair, Unconstitutional Cuts to Chicago Municipal Employees Retirement System
SB 1922 severely weakens retirement security and unfairly burdens workers and retirees
COLA Cuts
SB 1922 would significantly reduce the annual cost-of-living adjustment which enables retirees to keep
pace with inflation. This bill would replace the present 3% compounded annual COLA with a simple
COLA that would be the LESSER of 3% or the rate of inflation.
In the years 2017, 2019, and 2025, all retirees will be subject to COLA freezes. On top of those three
years of COLA freezes, current employees will face an additional one year COLA freeze in the first year
of retirement.
City and Board of Education employees and retirees do not receive Social Security.
o Compounding is critical to protect retirees from inflation. Social Security payments are annually
adjusted for inflation on a compounded basis so that recipients do not lose ground to the rising
cost-of-living. So SB 1922 does NOT provide the same kind of inflation protection that Social
Security recipients are guaranteed.
SB 1922s COLA cut reduces pensions by 30% over 20 years for many retirees. The average annuitant in
the Municipal fund will lose over $250,000 in that time period. Those living longer would see even
worse reductions.
Making matters even more difficult for senior citizens, by 2017, the City will completely stop paying for
retiree health insurance, increasing the impact of the COLA cuts. Premiums for a married couple will be
more than $1,000/month, eating up a huge portion of their pensions.
By imposing COLA cuts on this scale, the City risks losing its exemption from Social Security.
Employee Contributions
SB 1922 hikes employee contributions by 2.5% - for a total contribution of 11% of salary.
Intended Property Tax Increase
The Mayor has stated his intention to ask aldermen to increase property taxes by approximately $50 a
year for the next five years.
o This particularly impacts city and Board of Education employees all of whom are required to
live in the city. In addition to paying the property tax increase like all other residents, the
legislation will require the average city employee to pay an additional $1,250 each year for as
long as they work (through the employee contribution increase).
SB 1922 particularly impacts women and people of color and puts seniors near the poverty line
The Municipal fund provides retirement security for many of the citys lowest wage earners.
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o The overall average pension is $33,500.
o Women make up a majority of the funds participants (60%) and receive lower-than-average
annuities ($27,500).
o A significant number of participants are African-Americans and people of color.
The following examples show the damage done to the retirement security of the average female
retiree and the overall average retiree.
o A woman retiring from the Municipal fund in 2015 and relying on the average females annual
pension of $27,500 ($2,291/month) would see her pensions worth erode to only $18,800
($1,567/month) in real dollars after 20 years of retirement. Thats 120% of the federal poverty
level for a two-person household.
o An employee retiring from the Municipal fund in 2015 and relying on the overall average annual
pension of $33,500 ($2,791/month) would see his pensions worth erode to only $22,700
($1,891/month) in real dollars after 20 years in retirement. Thats less than 150% of the federal
poverty level for a two-person household.
SB 1922 is unconstitutional
Like previous attempts to cut pensions, SB 1922 illegally cuts benefits, even though the Illinois
Constitution states that pension benefits are a contractual right that cannot be diminished or impaired.
If litigation overturns the bill, the city will have kicked the can down the road and jeopardized its fiscal
situation and the retirement systems solvency. It may even owe back-payments to the systems.
SB 1922 fails to fix chronic underfunding
SB 1922 does not include sufficient guarantees that the City will end its practice of underfunding the
pension systems in order to address other budgetary needs. The bill contains no new revenue,
meaning there is no guarantee that the city can meet the payment schedule. Aldermen must now deal
with the issue.
The bills funding guarantee is weak and does not absolutely compel the retirement systems to require
the city to make pension payments. Even if the retirement systems decide to try to compel payments,
the bill does not require courts to adhere to the pension payment schedule. This could lead to
underfunding all over again.