A friend sent me the link to the article, “Did I earn my pension?” You may have earned it but will you get it? If we could trust the politicians we wouldn’t have the problems we now have regarding the pension.

For some time I have been asking questions as to what we can do, with little response from any of the different organizations. I finally came to the attached letter and posted the petition with never getting any input as to any being wrong in facts or logic. The point is of course to take it out of the hands of local/state politicians, it would in effect give the same state constitution protection in the federal court system for active as well as retired first responders. Still looking for input.

– Jim Kennedy

Dear Sirs,

I am a lifelong resident of Illinois, a state that could be the poster child for governmental financial mismanagement. I am also a retired Chicago police officer and like many others I have concerns about my pension. (The last pension newsletter, April 2018 states that the funding ratio is 22% “we will not be able to invest ourselves out of our problem of being so poorly funded.”) It seems obvious that political decisions have been made regarding Chicago pensions with no regard to the financial ramifications. In Chicago the political calculus for decades has been to continually push off the responsibility of properly funding Police and Fire pensions, making it a problem for the next administration. In this effort the city administration have had support from the state legislature, it being politically expedient to do so. The latest “Fix”, Senate Bill 777, pushes the 90% funding goal out to 2055 from 2040. The new bill was necessary because Chicago couldn’t afford the obligations in the previous law, ignoring the fact that the new bill would increase the cost by 47.1%. That is of course if by some miracle the “projected” returns from pension assets are realized and of course it will be more if they are not. This new law makes no provisions for a shortfall of expectations (At this point you have the option of laughing or crying). The legislatures support for this is such that the Governor’s veto was overridden to make it law. All this is consistent with the legislatures past actions and as things go forward the problem of properly funding these pensions only gets bigger and bigger until this “check kiting” of responsibilities comes to its unescapable end.

The police / fire fighter pension are municipal pension obligations and are protected by the Illinois State Constitution. This obligation extends not only to retirees but anyone currently working as well as dependent survivors. To diminish those obligation would take a change in that aspect of the state constitution, such a change would require broad state wide support in the face of considerable opposition.

Given the trajectory where else can this end but bankruptcy? It doesn’t seem in the realm of possible that the state would bail out the Chicago pensions, it being much more likely to let the city deal with a bankruptcy. Just a small legislative effort to change the law in that regard. After all the legislature “did its best to allow Chicago to work its way out of its problems” “how can the state now be expected to pay for Chicago’s mismanagement?” “How can the state afford it?”

People have told me “The city isn’t allowed to go bankrupt” as well as “the City can always raise taxes” theme. People vote with their feet and will move out of reach of a predatory government. The state of Illinois license plates display the motto “Illinois Land of Lincoln” After reading the latest demographic figures one wit suggested the motto be changed to “Illinois Land of Leaving”. My understanding of state law concerning municipal bankruptcy is that currently a municipality needs the approval of the “Illinois State Power Authority” (whoever they are). On January 1st 2015 Rep. Ron Sandak filed with the clerk, HB 0298, Synopsis as introduced, Amends the Illinois Municipal Code. In provisions concerning finance, provides that a municipality may file a petition and exercise powers pursuant to applicable federal bankruptcy law. Effective immediately. As of 10thJanuary 2017 the bill is “Session Sine Die” that is, waiting for action and as we have seen the state legislature is quite willing to give Chicago what it wants, as long as it doesn’t cost them anything. It’s just waiting for the right moment or need.

I have also been told that the Chicago casino will save the pensions, as advertised, perhaps. We have the city’s estimate of how much it would cost to build, we have the city’s estimate of how much revenue it would bring in. The fact is it would take some speculation to assume that a Chicago casino, if built, would be able to draw enough business from other gaming areas nearby to achieve its stated goal. Win lose or draw if built it would be a shot in the arm to the City’s economy. The Chicago casino would mean a lot of jobs and big contracts, “Visions of sugar plums danced in their heads “of the city hall connected. The state legislature has as yet to pass the needed law for that to happen, one wonders just how hard our mayor pushed for this. A representative outside Chicago would need strong incentive to pass a law that would allow Chicago to build something that would compete with business in their own district. Perhaps the mayor is counting on a legislative “failure to launch” in that way he would have political cover, he had the problem solved but “they” wouldn’t let him build the casino. At some point the pensions could very well collapse under the weight of their obligations, pie in the sky funding, unrealistic returns on investments will continue to make the funds ever more likely to become insolvent due to any financial down turn. Then of course the “cause” will be the financial markets fault, never mind the chronic underfunding that no one seems to have the ability or willingness to change. But why worry, in a July 7, 2017 press release the mayor declared victory over the pension issue. I suggest you look at the numbers, from financial analysts with “no dog in this fight “, who are you going to believe, the mayor or your lie’n eyes? If a politician acknowledges a problem they have to have a solution or at least political cover for one, or why would anyone vote for them. Higher taxes and reduced services doesn’t sound like a winner at the ballot box.

The political landscape has changed since this was first written, Mayor Emanuel will not run for reelection, pundits all speculate as to just why. All of the opinions center almost entirely on the Mayor thinking he might not win. A likely reason is that he thinks he would win. One can use a number of adjectives to describe Rahm Emanuel, smart, tough, shrewd politician and oh yes ambitious. During his term in office the cities pension obligation have gone from bad to worse, Rahm Emanuel’s finger prints are all over this. The only solution is extremely difficult economically and impossible politically, so what does a smart, tough, shrewd politician with greater ambitions do? He bails out, so when the financial crisis hits he can distance himself from the disaster, voters have notoriously short attention spans. Given enough time a politician with Rahms abilities can play the shell game with the responsibility and avoid blame and go on to bigger and better things. This solves Rahms problem but not ours.

It is unlikely that any of the mayoral hopefuls would entertain then idea of a city bankruptcy, it would undermine their abilities and signal a lack of confidence in the city. After a short period of time “after looking at the books we have discovered that things are much worse than we were lead to believe”. At this point campaign promises and rhetoric are adjusted. Politically speaking a bankruptcy sooner rather than latter would lay it closer the door of previous administrations.

The police / Fire unions and organization just don’t have the political clout to motivate any meaningful changes. Despite the best efforts of all the first responders’ organizations the problem has only grown with the unfunded liability. We need to think and act outside the box, doing the same things over and over and expecting a different result is of course one description of insanity.

Under funded public pensions are by no means just a problem in Illinois, many writers, public interest groups and financial think tanks have written articles about this dangerous situation. That the failure of these systems and the possible cascading effects could have disastrous consequences far beyond the pensioners and the municipalities involved. State and local government have created a financial crisis that they have refused to address and eventually the problem will be laid at the doorstep of the federal government.

The city of Chicago has painted itself into a corner and as time goes by the room to maneuver gets smaller and smaller eventually leaving one option, bankruptcy. Once in bankruptcy it is in the hands of a federal court. Under federal law, state and local politics at this point are irrelevant. Just where the pensions would come out in this is unknown. I think we have a window of opportunity to change that.

The solution:

Since state and local authorities will do nothing to stop this slide into bankruptcy and the national political leadership is unlikely to act. The only option is to effect a remedial solution. The only pathway is to convince one person to act,,, the President.

Throughout history there have been many times when the local officials have been unwilling or unable to deal with problems affecting citizens, we have the same option they have had, we petition the government, that is to say the President. I cannot think of any reason or logic as to why any police officer, firefighter or paramedic would not sign a petition that asks that their pension be properly funded. Locally that would amount to several thousand signatures. Multiply that by all the other underfunded pension systems nationally and we would have a loud voice.

Municipal bankruptcies are processed (only) in the federal court system under chapter 9. Chapter 9 has little to say regarding how pension obligations are to be addressed, ” Municipalities may also reject collective bargaining agreements and retiree benefit plans without going through the usual procedures required in chapter 11 cases”. The city of Chicago has been fighting a long and ongoing legal battle with retirees regarding health care provisions, in the end many retirees have been hurt badly. The mayor has taken pride in the fact he has reduced those benefits. Keeping in mind how the Chicago city administration handled retiree health care imagine negotiating your monthly pension check with Rahm “The Compassionate” Emanuel, the mayor who doesn’t let a crisis go to waste. The faces may change but the game is the same.

A petition drive would cost nothing, in fact the white house has a website to post petitions. The worst thing that could happen would be to focus attention on the problem. If it succeeded, the bond rating companies would enforce financial reality on municipalities. The greater the uproar the greater the need for change. If some municipalities were to bankrupt due to it, better now than 3-5 years from now when the problems would only be greater and solutions harder on all concerned. This is an opportunity to do more to safeguard first responder pensions that has been accomplished in decades of dealing with the local and state political establishment.

The petition would ask the president to sign an executive order amending chapter 9.” The responsibilities, obligation and service of first responders creates a debt obligation on the part of the municipality giving the pension obligations of first responders the same status that a special revenue bond would have in a chapter 9 proceeding and give those obligations preference over other debt”.

Politicians opposing this would have to admit to ignoring the problem or lying about their solution.

Why would the president sign such an order? There is a national threat caused by financial mismanagement at the local level. The 10th amendment does not allow federal interference in state matters. The only remedy is for remedial action when the federal courts get involved. If the president failed to act then he would own part of any pension failure in the future.

President Trump has a largely conservative base who have a better appreciation of first responders than do his detractors and political opponents, his supporters would likely approve.

It would force moneys into the equities markets there by strengthen them.

There is even a sort of precedent. During the Obama administration GM went into bankruptcy. I certainly do not claim to know much about it but the Obama administration got involved during the proceedings and somehow got the workers of GM a better deal at the expense of the bond holders. This seems to be changing the rules at the end of the game and we would not be asking for anything exposé facto.

Large changes begin at the top. The changes would at first effect cities of 1.5- 2 million population to start as per the last census, that figure to be lowered at future date. Large population centers are for the most part concentrations of liberal democratic opposition to President Trump. He would be doing the right thing and at the same time having the opposition pay for it.

If you have any concerns about the safety of your pension, don’t trust the local political establishment to make good on promises. Living and depending on a pension with more obligation than assets, paying into a pension that might not be there when you retire? Follow the link below and add your name to the petition, it will cost you nothing to have your voice heard. Send this link to any First responder whom you think might be interested.