Daley vs. the Pension Tensions | Bleader

Friday, December 3, 2010

Daley vs. the Pension Tensions

Posted By on 12.03.10 at 01:07 PM

Sign up for our newsletters Subscribe

WBEZ's Travis Truitt reports that Mayor Daley has come out against the recently-passed state pension legislation, because its demand for more money from the city towards pension funds would... wait for it... increase property taxes. Even though there are other options.

Pensions (both locally and around the country) are an interesting, ongoing fuckup. Or at least the problems are paradoxically interesting in their banality. I think Chicagoans tend to assume that corruption is at the root of our problems, and though you can find accusations of it here and there in relation to pension funds, they're dwarfed by basic, workaday mismanagement.

A couple weeks ago, the Tribune's Jason Grotto did an excellent, lengthy investigation of the reasons behind declining pension funding in the city's major pension funds, and the answer is obvious, though no less worthwhile for it:

Time and again, the funds have been used as a bargaining chip or a piggy bank. Politicians trimmed budgets by offering early retirement incentives and greased union contract deals with increases in benefits. "Pension holidays" allowed the city to avoid paying into workers' retirement funds.

Or, from Bob Secter, writing about state pensions in May of this year:

Political expert Charles N. Wheeler III said the financial neglect dates back at least 40 years. "For governors and legislators, there were always more pressing needs they wanted to spend money on," said Wheeler, a professor at the Springfield campus of the University of Illinois.

If it makes you feel any better, though it probably shouldn't, Chicago's not alone. The excellent financial reporter Roger Lowenstein (author of the classic When Genius Failed) wrote a book on the country's "retirement time bomb," While America Aged. He doesn't focus on Illinois or Chicago at all, choosing instead GM, New York City, and San Diego, but the problems are similar. As Lowenstein describes, pensions are perfectly designed for benign neglect: they require long-term, conservative management, while being subject to short-lived changes in investments, which obscure the long-term picture. The parties on either side of pension negotiations have incentives to make the scenario worse (by asking for and promising better future benefits while neglecting current contributions), and the bills accrue so slowly that politicians, employees, and labor representatives are often able to benefit from their decisions (in the form of votes, approval, and pension benefits themselves) while leaving the hazard to their successors.

And the problems are really, truly long-term, stretching the attention span of politicians and voters. Just browse around the Trib archive for evidence:

"A class-action suit on behalf of current and former Chicago police officers and firefighters was filed Friday, accusing the mayor and other officials of failing to make about $5.4 million in pension contributions." (10/6/90)

"The union representing Chicago Transit Authority drivers took legal steps Wednesday to force the CTA to make long-disputed pension fund contributions and to grant cost-of-living raises to employees." (5/2/85)

"Investment Results Give [State] Teacher Pension Fund A D" (4/24/97)

"The state's employee pension funds are distressingly underfunded. Accounts in the five funds-which cover state government employees, public university workers, Downstate teachers, judges and legislators-range from just 41.8 to 61.6 percent of their long-term retirement obligations." (8/12/91)

And on, and on, and on.

And what happens if a Chicago pension fund goes under? No one really knows. Can we cut existing obligations? It's unlikely.

Is it possible to do pensions right? Yes, Adam Doster argues, if you force yourself to: "Illinois' problem is not that state worker retirement benefits are too big. It's that the state has, for decades, avoided making full contributions to its pension systems." But running the pension systems right still won't fix the problem of having done it so wrong for so long.

Comments

Showing 1-1 of 1

Add a comment

 
Subscribe to this thread:
Showing 1-1 of 1

Add a comment

More by Whet Moser

  • —30—

    A farewell, and some favorite pieces from the Reader.
    • Jan 14, 2011
  • The Very Political Life of Bill Daley

    Bill Daley: lifetime centrist
    • Jan 14, 2011
  • The Hidden Hands

    The Hidden Hands

    In every successful campaign—and every dud—pros are masterminding and organizing from offstage. Meet the people behind six mayoral candidates.
    • Jan 13, 2011
  • More »

Agenda Teaser

Music
Russ Johnson Fulton Street Collective
December 13
Food & Drink
Culinary Cannabis Demo Empower Clinics
December 13

Tabbed Event Search

The Bleader Archive

Popular Stories