Governor J.B. Pritzker recently signed a bill which alters cost-of-living adjustments (COLA) for firefighter pensions moving forward. At issue was how pension benefits are given to Chicago firefighters.
Previously, any Chicago firefighter who was born on or after January 1st received a non-compounded 1.5% COLA with a cumulative cap of 30% (as long as they had at least 20 years of service). Consequently, any firefighter born before January 1st receives a 3% COLA as long as they served 20 years as well. Benefits that fall into either one of these categories are considered Tier 1 employees.
The problem here is that a Chicago firefighter may have a longer tenure with the Fire Department, yet potentially accumulate less in pension benefits solely because of his birthdate and the cap.
The bill signed by Gov. Pritzker not only removes the date of birth cut off, but also gives increases the COLA to 3 percent and removes the 30% cap for all firefighters. In effect, the law adds to the state’s pension burden with the removal of the restrictions.
At least that is the worry of Moody’s, one of the three major credit rating agencies, which recently asserted that the law has “credit negative” implications. The city of Chicago has roughly $46.6 billion in pension liabilities and they make up about 17 percent of operating revenue, according to The Chicago Sun-Times. Moreover, the firefighters pension fund has the worst funding ratio compared to all four of the city’s funds.
From an fairness standpoint, the move makes sense. The current system allows a firefighter to receive a more generous benefit simply because of his birthdate. Moreover, supporters contend the city has historically given higher benefits because the birth date restriction can be intentionally moved. The law allows for greater transparency and makes the city legally comply with those practices so that the true cost of pension obligations can be more accurately gauged.
However, to say that the legislation did not have some sort of political motivation would be misguided. The chief sponsor of the bill, Robert Martwick, hails from a Northwest district in which there is a large number of Chicago firefighters. Whatsmore, the state representative has had an adverse relationship with Chicago mayor Lori Lightfoot.
A couple years back, the two got into a heated exchange in the midst of a mayors race over a bill that would have turned the position of Cook County Assessor into an appointed position, rather than elected. Martwick was its chief sponsor and a supporter of her opponent Toni Preckwinkle.
The problem with the law is that it fails to fix any major issue surrounding pensions. Instead, it emerged as almost a random initiative its implication will certainly add to the states pension liabilities where primary goal should be reform to reduce the pension deficit, not add to it.