CHICAGO (CBS) — Labor leaders were planning to go to court to block legislation cutting pension benefits and raising the retirement ages for many city workers, and opening the door for a property tax hike to help pay the city’s share of employee pension costs.
WBBM Newsradio Political Editor Craig Dellimore reports Anders Lindall, spokesman for AFSCME 31, which represents thousands of city employees, said a coalition of labor groups was preparing a lawsuit to challenge the city’s pension reform plan.
He said the measure proposed by Mayor Rahm Emanuel, and signed by Gov. Pat Quinn on Monday, would reduce the value of earned pensions by one-third within 20 years of retirement, and that’s a violation of the Illinois Constitution.
“The problem in the retirement systems is not the cost of the benefit. The problem is the city’s failure over decades to pay a responsible actuarially-based share of the contributions,” he said.
Under the mayor’s plan, city workers’ annual cost-of-living adjustments on their pensions would fall from 3 percent a year, compounded, to a straight benefit of half the rate of inflation, or 3 percent, whichever is less.
Lindall said city workers always have paid their share, but the city repeatedly skipped or delayed its required payments.
“Now, regrettably, rather than working together to solve that funding problem in a way that everyone can support, the mayor [and] General Assembly pushed through drastic cuts to the pension benefit,” he said.
He said delegates at the 1970 Constitutional Convention intended to protect public employees from just this kind of action. The 1970 rewrite of the state constitution included a provision that makes public employee pension plans contractual relationships, “the benefits of which shall not be diminished or impaired.”
“The framers of the state constitution said that they wanted to avoid a situation where politicians didn’t pay their share, and down the road said ‘Well, we just can’t afford it,’ and now a retiree is losing their life’s savings,” Lindall said.
The mayor’s pension reform plan would allow the City Council to raise the city’s property tax to pay its share of pension costs. He has proposed raising property taxes in the city by $50 million a year for five years starting in 2016.
The governor has urged the mayor not to call for a vote on a property tax hike and, at least for the next year, it appears he’ll get his wish, after Quinn signed legislation allowing the city to increase the tax it charges on cell phones and landlines.
That measure would allow the phone tax to rise from $2.50-a-month to $3.90-a-month, and generate $50 million a year in revenue for the city.
Emanuel has said he will rely on the new phone tax revenue to fund the first year of the city’s increased payments to employee pensions. Meantime, he will work to find alternatives to a property tax hike for the other four years.
That will spare aldermen from voting on a property tax hike before the city elections next year.
The mayor’s plan covers only city laborers and municipal workers. He has yet to come up with a plan to overhaul the pension systems for police officers, firefighters, and teachers.