Rauner Vetoes Bill Giving Chicago More Pension Rope

Governor Bruce Rauner vetoed a bill that gives the City of Chicago fifteen more years to bring its pension fund payments for police and fire fighters up to a 90% funding level.

The bill was sponsored by Senate President John Cullerton.

Here is the Legislative Digest summary of Senate Bill 777:

Amends the Chicago Police and Chicago Firefighter Articles of the Illinois Pension Code.

For payment years 2016 through 2020, specifies the amount for the City of Chicago’s required annual contribution to each fund. Provides that beginning in payment year 2021, the City’s total required contribution to each fund shall be an amount that is equal to the normal cost of the fund, plus an amount sufficient to bring the total assets of the fund up to 90% of the total actuarial liabilities of the fund by payment year 2055 (instead of 2040); changes the actuarial cost method to entry age normal. Includes provisions for funding from any proceeds received by the city in relation to the operation of a casino within the city.

Provides a mechanism to enforce funding through mandamus.

Creates a new minimum retirement annuity provision based on the federal poverty level for certain persons.

Effective immediately.

The Governor’s veto message follows:

Today I veto Senate Bill 777.  This bill continues the irresponsible practice of deferring funding decisions necessary to ensure pension fund solvency well into the future.  The bill effectively makes Chicago taxpayers borrow from the pension funds at an additional cost of $18.6 billion. It’s a game politicians like to play with taxpayers’ dollars by delaying payments today and forcing future elected officials to deal with pension funding issues tomorrow.  As all know by now, that practice led to our current pension woes across state and local pension systems.  Chicago police retirees are rightfully opposed to the bill.  Instead of doubling-down on our past mistakes, we must learn from them.  In vetoing this bill, I stand with all Chicago taxpayers who will be saddled with higher future pension contributions if the bill were to become law.

The cost to Chicago’s taxpayers of kicking this can down the road is truly staggering.  Actuaries estimate that between now and 2055, when the law would require these funds to achieve the 90% funded ratio, the total contributions to the Policemen’s Annuity and Benefit Fund of Chicago would increase by approximately $13 billion—an increase of 47.4% over contributions required under the current law.  For the Firemen’s Annuity and Benefit Fund of Chicago, the total contributions would increase by approximately $5.6 billion, or 47.1% over the amounts under the current law.  In other words, by deferring responsible funding decisions until 2021 and then extending the timeline for reaching responsible funding levels from 2040 to 2055, Chicago is borrowing against its taxpayers to the tune of $18.6 billion.  This practice has to stop.  If we continue, we’ve learned nothing from our past mistakes.

Irresponsible funding decisions have left us with state pension funds that are collectively underfunded to the tune of $111 billion.  The poor fiscal health of these pension funds means we have to spend nearly 25 cents out of every dollar of the state budget on pensions, which significantly impairs our ability to provide vital services to those in need.

Irresponsible funding decisions have left teachers in Chicago with a drop in pension reserves from 100% funded as recently as 2001 to 51.8% funded today.  On that trajectory, teachers can count on receiving only slightly more than 50 cents of every dollar owed to them in retirement – all because of a decade of pension holidays in which Chicago skipped the necessary contributions to the teachers’ pension fund.

Irresponsible funding decisions have left two of Chicago’s main employee pension funds near insolvency.  The Municipal Employees’ Annuity and Benefit Fund of Chicago and the Laborers’ Annuity and Benefit Fund of Chicago, covering some 79,000 current and former Chicago workers, are projected to have zero balances as early as 2026 and 2029, respectively. 

This is what happens when you fail to responsibly fund pension obligations.

And now, against this historic backdrop, Chicago wants to do it again, this time gambling with the pensions of its police officers and firefighters.  SB 777 would permit Chicago to contribute to the two pension funds for its public safety workers far less than is actuarially required during fiscal years 2016 through 2020.  Even worse, the bill would allow Chicago an additional 15 years to bring the funds to a responsible funding level of 90%, with the target year shifting from 2040 to 2055.  Current and retired police officers and firefighters would have to wait until 2055 to know their pensions are secure.  This is bad policy regardless of any fiscal impact, but doubly so when it comes with a price tag of $18.6 billion.

 Therefore, pursuant to Section 9(b) of Article IV of the Illinois Constitution of 1970, I hereby return Senate Bill 777, entitled “AN ACT concerning public employee benefits”, with the foregoing objections, vetoed in its entirety.


Rauner Vetoes Bill Giving Chicago More Pension Rope — 4 Comments

  1. Jack Franks voted yes.

    Yes to kick the pension 90% funding can another 15 years, which would have ultimately resulted in higher taxpayer costs to fund Chicago Police and Fire pensions.

    That is 90% funding, not 100% funding.

    Actuarial rules are based on 100% funding, not 90% funding.

    In public sector defined benefit plans, the taxpayer makes up the shortfall resulting from less money being available for the pension fund to invest, with more money coming from taxpayers and less from investment returns.

    Same problem, salary and benefit hikes and diverting funding from pensions to salary hikes has resulted in unaffordable pensions.

    These types of votes are yet another example of fiscal irresponsibility by Jack Franks.

  2. Wondering if Bruce Rauner is making a difference vs every governor since 1970?

    1970 was the year the pension sentence was added to the Illinois state constitution which has been interpreted to mean unlimited unfunded and underfunded pension benefit hikes to pensions that are already underfunded are contractual and cannot be diminished or impaired, which is insanity and a taxpayer nightmare.

    Wondering one way Jack Franks is a tax hiker?

    Wondering one reason we have massive underfunded pensions.

    Understand this bill and why it was overturned.

  3. The General Assembly overturned Senate Bill 777.

    SB 777 is kick the can for Chicago Police and Chicago Fire pension funding, which will cost taxpayers more money to fund Chicago Police and Chicago Fire pensions in the long run.

    Jack Franks voted yes again on this bill.

    This time to over ride Governor Rauner’s veto of the bill.

    More pension insanity in Illinois.

    Senate Bill 777 became Public Act 99-0506 (PA 99-506) in the 99th General Assembly.

    Tax Hiker not Tax Fighter Franks strikes again.

    Chicago Police and Chicago Fire being 2 of the 20 public sector pension systems in the Illinois Pension Code.


    Here are the 19 pension systems in the Illinois Pension Code, plus CHA, for a total of 20.

    Chicago Fire

    Chicago Police

    Chicago Laborers (LABF)

    Chicago Municipal (MEABF)

    Chicago Housing Authority (CHA)

    Chicago Park District

    Chicago Public Schools

    Cook County Employees

    Cook County Forest Preserve

    Metropolitan Water Reclamation District Retirement Fund (MWRDRF)

    Downstate Police (Police outside Chicago)

    Downstate Fire (Fire outside Chicago)

    Illinois Municipal Retirement Fund (IMRF)

    General Assembly Retirement System (GARS) – “State” pension fund

    Judges Retirement System (JRS) – “State” pension fund

    Teachers Retirement System of the State of Illinois (TRS) – “State” pension fund

    State Employees Retirement System (SERS) – “State” pension fund

    State University Retirement System (SURS) – “State” pension fund

    Chicago Transit Authority (CTA)

    Regional Transit Authority (RTA) – includes Metra (train) and PACE (bus)


    Now there is more money available in the budget for salary hikes, which will hike pensions.

    The cycle continues as it has for 46 years.

  4. Jack Franks voted for this law which forces taxpayers to pay more to fund Chicago police and fire pensions.

    This was accomplished by reamortizing the pension funding schedule.

    The pensions were scheduled to be 90% funded in 2040.

    With this law, the pensions are scheduled to be 90% funded in 2055.

    That is an increase of 15 years.

    That extends the current 25 year (2016 – 2040) amortization schedule to a 40 year (2016 – 2055) amortization schedule.

    The amortization schedule consists of the employer annual payments to the pension fund.

    Ralph Martire of the Center for Tax and Budget Accountability is a big proponent of reamortizing pension unfunded liabilities.


    Another example of Jack Franks voting yes on legislation that hiked pension costs and will almost certainly result in hiked taxes to fund the hiked pension costs.

    Even though Jack Franks says he has never voted for a tax hike.

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