* 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.”