STRENGTHENING CHICAGO’S PENSIONS

CITY OF CHICAGOMAYOR RAHM EMANUEL

CITY OF CHICAGO

MAYOR RAHM EMANUEL

FUND STABILIZATION BONDS IMPACT ON TOTAL CITY DEBT

$6 BILLIONIN SAVINGSTO TAXPAYERS

$6 BILLIONIN SAVINGSTO TAXPAYERS$200 MILLION IN2020 BUDGET$200 MILLION IN2020 BUDGET

S T R E N G T H E N I N G C H I C A G O ’ S P E N S I O N S

IMPROVED RETIREMENT SECURITY

2052 the funds would reach 50 percent funded on current path.

2019 the funds would reach 50 percent funded under fund stabilization.

REDUCING TAXPAYER BURDEN Reducing the interest rate on the City’s pension debt would mean that taxpayers would be liable for less.

City of Chicago’s Debt Stays Level: $38.3B

Source

Total Pension Libility $28.0 $18.0

GO Bonds $8.8 $8.8

STSC Bonds 1.4 1.4

Fund Stabilization Bond 10.0

Total Bonded Debt $10.2 $20.2

Total Long-Term Liability $38.3 $38.3

*Pension liability as of 12/31/17, Bonded debt as of 8/1/18**Includes stabilization fund deposit; does not account for COITotals may not add due to rounding.

CurrentLiability/DebtOutstanding*

Post-BondLiability/DebtOutstanding**

BENEFITS OF A FUND STABILIZATION BONDThe fund stabilization bond is like refinancing a mortgage; it lowers the interest rate you pay but doesn’t change your total debt. It also wouldn’t extend the time to repay the debt.

All proceeds would be deposited into the pensions, immediately improving their health (funded status). The mayor is recommending that the city council vet a $10 billion proposal.

LOOKING AHEAD: SOME VIABLE SOLUTIONS, CONT’D

When I was elected Mayor in 2011, our city's pension funds were heading towards insolvency, jeopardizing a secure retirement for workers like first responders and teachers. Together, we have made progress to ensure the hard-working Chicagoans we depend on have a retirement they can depend on as well.

My fundamental philosophy has always been that solutions to our pension challenges must be based on a progressive, shared approach.

Enclosed is a summary of the steps we have taken together; as elected o�cials, labor leaders, and taxpayers; and a roadmap forward to continue to confront this challenge head-on.

For workers and retirees, pensions represent the work of a lifetime - the hard-earned reward for showing up every day to do their job, keep their word, and live up to their responsibility. That must be our work as well - to do our job, keep our word, and live up to our responsibility.

Sincerely,

Mayor Rahm Emanuel

Letter from the MayorS T R E N G T H E N I N G

C H I C A G O ’ S P E N S I O N S

WHAT’S THE IMMEDIATE FUTURE?Additional revenue required to make pension payments due in 2020 if nothing is done: $276 million

Additional revenue required to make pension payments due in 2022 if nothing is done: $310 million

LOOKING AHEAD: SOME VIABLE SOLUTIONS

to allow benefit reforms that will ensure long-term retirement security for workers and protect taxpayers. Provide flexibility to move cost-of-living increases more in line with the economy.

Move forward with President Cullerton’s consideration model. Let employees choose how to structure their retirement plans.

Ensure Chicago shares in revenue from legalized marijuana to reduce the taxpayer burden for pension liabilities. Allow Chicago to raise its own revenue from marijuana by establishing a home rule tax.

Pursue a Chicago-owned casino and dedicate revenues to workers’ pensions. The mayor is supporting legislation to move forward with this concept

$42 billion amount required to cover the cost of COLA increases from 2017 to 2057

$26 billion amount taxpayers would save if all retirees receivea Tier 2 COLA through 2057

TODAY a retiree who received $60K in benefits in 2011: • $71,643 (Tier 1 City of Chicago Pension) • $65,452 (Social Security)

INCREASED PENSION CONTRIBUTIONS

7,000,000

6,000,000

5,000,000

4,000,000

3,000,000

2,000,000

1,000,000

2004-11

$3.2B

$6.1B

2012-19

HOW OURREFORMS HAVE HELPED THE PENSIONS

PURSUE A CONSTITUTIONAL AMENDMENT

HEALTH OF PENSION FUNDS: FUNDED RATIO BEFORE AND AFTER REFORM

* Projected numbers are based on estimates, including actuarial and interest rates assumptions.

APR

IL 2

010

2010

FEB

. 20

13 -

JU

NE

2014

MA

Y 2

016

Loo

min

g In

solv

ency

. The

Co

mm

issi

on

to S

tren

gth

en C

hica

go

’s P

ensi

on

Fun

ds

rep

ort

s th

at a

ll o

f th

e C

ity’

s p

ensi

on

fund

s ar

e p

roje

cted

to

bec

om

e in

solv

ent

by

2030

, wit

h th

e fi

rst

fund

go

ing

und

er in

20

22.

New

Em

plo

yee

Tier

s. S

tate

law

cha

nges

to

cre

ate

a se

cond

tie

r o

f em

plo

yee

ben

efits

and

ad

just

ben

efits

fo

r em

plo

yees

, end

ing

the

ann

ual 3

per

cent

co

mp

oun

ded

in

crea

se f

or

new

hir

es.

Mun

icip

al a

nd L

abo

rers

Ag

reem

ent.

In c

olla

bo

rati

on

wit

h la

bo

r le

ader

s, M

ayo

r E

man

uel s

upp

ort

s S

enat

e B

ill 1

922

, ref

orm

ing

ben

efits

and

incr

easi

ng b

oth

the

em

plo

yee

and

em

plo

yer

cont

rib

utio

ns. T

he C

ity

Co

unci

l sub

seq

uent

ly in

crea

sed

the

9

11 s

urch

arg

e to

fre

e up

the

cit

y’s

corp

ora

te f

und

s fo

r in

crea

sed

pen

sio

n p

aym

ents

.

Ove

rrid

e o

f G

ov. R

aune

r’s

Vet

o o

f P

olic

e an

d F

ire

Ref

orm

s. G

ov. R

aune

r ve

toes

the

Cit

y’s

neg

oti

ated

po

lice

and

fire

pen

sio

n re

form

s. W

ith

May

or

Em

anue

l’s

stro

ng a

dvo

cacy

, bip

arti

san

maj

ori

ties

in t

he G

ener

al A

ssem

bly

ove

rrid

e th

e G

over

nor’

s ve

to.

JULY

20

17

Ove

rrid

e o

f G

ov. R

aune

r V

eto

of

Mun

icip

al a

nd L

abo

rers

Ref

orm

s. G

ov-

erno

r R

aune

r ve

toes

the

Cit

y’s

neg

oti

ated

mun

icip

al a

nd la

bo

rers

’ pen

sio

n re

form

s.

Wit

h M

ayo

r E

man

uel’s

str

ong

ad

voca

cy, t

he G

ener

al A

ssem

bly

incl

udes

the

Cit

y’s

neg

oti

ated

ref

orm

s in

the

sta

te b

udg

et, a

nd o

verr

ides

the

Gov

erno

r’s

veto

. Thi

s en

sure

s th

at t

he M

ayo

r’s

pla

n to

sec

ure

the

mun

icip

al a

nd la

bo

rers

pen

sio

n fu

nds

bec

ame

law

.

JULY

20

17

Fund

ing

Tea

cher

s’ P

ensi

ons

. Wit

h th

e M

ayo

r’s

stro

ng a

dvo

cacy

, the

Gen

eral

A

ssem

bly

pas

ses

a b

udg

et t

hat

end

s th

e p

ract

ice

of

fund

ing

all

teac

her

pen

sio

ns b

ut

Chi

cag

o’s

, pro

vid

ing

CP

S w

ith

an a

dd

itio

nal $

200

mill

ion

annu

ally

fo

r te

ache

r p

en-

sio

ns a

nd a

llow

ing

CP

S t

o r

eins

tate

a $

250

M p

rop

erty

tax

levy

onl

y fo

r te

ache

r p

en-

sio

ns.

FEB

. 20

13

May

or

Em

anue

l rea

ched

a la

ndm

ark

agre

emen

t w

ith

the

Chi

cag

o P

olic

e Se

rgea

nts’

Ass

oci

atio

n. It

wo

uld

hav

e en

sure

d f

air

emp

loym

ent

term

s, p

rese

rved

re

tire

men

t se

curi

ty f

or

the

serg

eant

s an

d r

educ

ed t

he b

urd

en o

n C

ity

taxp

ayer

s. It

p

rovi

des

a f

ram

ewo

rk a

nd s

et t

he t

one

and

pre

ced

ent

for

a p

ath

forw

ard

.

JAN

. 20

17M

unic

ipal

and

Lab

ore

rs F

und

ing

and

Ref

orm

s. In

co

llab

ora

tio

n w

ith

lab

or

lead

ers,

May

or

Em

anue

l sup

po

rts

the

Gen

eral

Ass

emb

ly’s

intr

od

ucti

on

of

the

Cit

y’s

pla

n fo

r m

unic

ipal

and

lab

ore

rs’ p

ensi

ons

, inc

lud

ing

an

incr

ease

in e

mp

loye

e co

ntri

but

ions

, ben

efit

refo

rms

and

a p

aym

ent

ram

p.

Co

urt

Bat

tle

over

Pen

sio

n R

efo

rms.

The

Cit

y o

f C

hica

go

fig

hts

to s

upp

ort

the

p

ensi

on

refo

rms

of

S.B

. 19

22 t

hat

seve

ral l

abo

r un

ions

neg

oti

ated

; ho

wev

er, t

he Il

lino

is

Sup

rem

e C

our

t st

rike

s d

ow

n th

e la

w in

Mar

ch 2

016

, cit

ing

the

Co

nsti

tuti

on.

JULY

20

15 –

M

AR

CH

20

16

FEB.

201

5 -

MAY

201

6

Po

lice

and

Fir

e Fu

ndin

g. M

ayo

r R

ahm

Em

anue

l neg

oti

ates

new

pen

sio

n fu

ndin

g

refo

rm w

ith

po

lice

and

fire

uni

ons

to

ram

p u

p C

ity

pay

men

ts o

ver

four

yea

rs –

whi

ch

req

uire

s a

stat

e la

w t

hat

pas

ses

the

Gen

eral

Ass

emb

ly. T

he C

ity

Co

unci

l pas

ses

a p

hase

d-i

n $

543

mill

ion

pro

per

ty t

ax in

crea

se t

o f

und

po

lice

and

fire

pen

sio

n p

ay-

men

ts.

JULY

20

15Sa

ving

Tea

cher

s’ P

ensi

ons

. May

or

Em

anue

l pro

po

ses

a “t

hree

-way

han

dsh

ake”

b

etw

een

the

stat

e, p

rop

erty

tax

pay

ers

and

tea

cher

s to

sec

ure

Chi

cag

o t

each

ers’

p

ensi

ons

.

SEPT

. 20

16Fu

ndin

g M

unic

ipal

Pen

sio

ns. T

he C

ity

pas

ses

a w

ater

-sew

er u

tilit

y ta

x th

at

incr

ease

s ea

ch y

ear

to h

elp

fun

d t

he r

equi

red

gro

win

g C

ity

cont

rib

utio

ns t

o t

he m

u-ni

cip

al e

mp

loye

es’ p

ensi

on

fund

.

OC

T. 2

016

Pen

sio

n A

gre

emen

t w

ith

Teac

hers

. Tea

cher

s ag

ree

that

new

em

plo

yees

mus

t m

ake

the

full

cont

rib

utio

n to

the

ir p

ensi

on,

end

ing

the

pra

ctic

e o

f th

e em

plo

yer

mak

ing

bo

th t

he e

mp

loye

r co

ntri

but

ion

and

the

bul

k o

f th

e em

plo

yee’

s co

ntri

but

ion.

TOD

AY

Dur

ing

May

or

Em

anue

l’s a

dm

inis

trat

ion,

the

Cit

y w

ill h

ave

com

mit

ted

$6

.1 b

illio

n to

pen

sio

ns f

or

city

wo

rker

s, a

nd a

n ad

dit

iona

l $4

.2 b

illio

n fo

r te

ache

rs’

pen

sio

ns. I

n to

tal,

mo

re t

han

$10

bill

ion

will

be

dep

osi

ted

in p

ensi

on

fund

s as

a

resu

lt o

f M

ayo

r E

man

uel’s

bal

ance

d a

pp

roac

h an

d p

artn

ersh

ip w

ith

Chi

cag

o-

ans

and

wo

rker

s –

all a

chie

ved

whi

le e

xpan

din

g t

he e

cono

my

and

wit

hout

cu

ttin

g s

ervi

ces

or

forc

ing

tax

pay

ers

to s

houl

der

the

bur

den

of

gro

win

g p

en-

sio

n co

sts

alo

ne.

PE

NS

ION

RE

FO

RM

AT

A G

LAN

CE