Rank and file Chicago Police Sergeants Association members rejected a proposed contract that included pension reforms billed by Mayor Rahm Emanuel as a potential framework to help solve the city’s pension crisis.
The collective bargaining agreement with one of the leadership of one of the city’s smaller unions was announced last month.
Many of the pension reforms, including a change in the existing funding structure that spares the city a looming spike in payments, would also have required approval from the City Council and Illinois General Assembly.
The proposed four-year deal offered an overall 9% pay hike. It raised the retirement age, raised pension contributions, cut cost-of-living increases, and allowed retirees to continue to receive subsidized health care but required future retirees to contribution 2% of their annuity to defray city costs.
The plan also phased in a shift to city contributions from one based on a statutory formula to one based on an actuarially required contribution, or ARC.
Chicago carries $16.7 billion of unfunded pension liabilities across its four funds and faces a $600 million increase in its annual payments for its police and firefighters funds in 2015 under the looming shift to an ARC payment schedule.
The city has a budget of about $6.5 billion so Emanuel has warned that the increase would drive a massive property- tax hike and/or deep cuts.
Emanuel expressed his disappointment with the vote in a statement. “Neither public employees nor taxpayers should be asked to pay into a system that is unsustainable,” he said. “This agreement was a break from the dishonesty of the past and provided a roadmap for a fair and honest pension system.”
Emanuel last year floated a series of pension reforms with the General Assembly but they fell by the wayside as lawmakers debated state-level reforms aimed at addressing $95 billion of unfunded obligations.
