Wednesday, May 2, 2012

How Daley beefed up his pension payouts





Two years into his reign as Chicago's longest-serving mayor, Richard M. Daley took advantage of the state's convoluted pension system to significantly increase his potential payout while saving $400,000 in contributions, a Tribune/WGN-TV investigation has found.

Daley, a former state senator, made it happen by briefly rejoining the legislative pension plan in 1991. He stayed there just one month before returning to Chicago's municipal pension fund, but the switches made him eligible for benefits worth 85 percent of his mayoral salary — a better rate than all other city employees receive.

He was just 49 years old at the time. Even if Daley had never won another election, he could have started collecting a public pension at age 55 of $97,750 a year. Without the steps he took, his public pension benefits at that age would have been worth just $20,686.

Of course, Daley went on to win five more elections, remaining ensconced on the fifth floor of City Hall for the next two decades. When he retired last May, his pension benefits had grown to $183,778 a year — about $50,000 more than he would have otherwise received.

Daley declined to be interviewed for this story. His spokeswoman, Jacquelyn Heard, wrote in an email: "I can only assume that his pension was handled in the same manner that anyone's would be, given the length of service — nearly 40 years — in government."

The Tribune and WGN-TV already have detailed how Daley used the city's pension funds for political purposes. In 1991, the same year he secured his much larger pension, Daley's administration helped aldermen land a dramatic pension increase, providing them with benefits far exceeding those of the average city worker.

The same legislation, rushed through the General Assembly on the last day of the session, also gave private labor leaders public pensions based on their much higher union salaries. Under Daley's watch, former Chicago Federation of Labor President Dennis Gannon was given a one-day city job that allowed him to collect a public pension based on his $200,000 private union salary.

In 1995, when Daley wanted to fund his school reform package, his administration pushed legislation that allowed it to divert $1.5 billion from the Chicago Teachers' Pension Fund over a 15-year period.

All the while, Daley blessed benefit increases for city workers without ensuring that payments into the funds would cover the costs, a problem worsened by the economic downturn. Today, the combined unfunded liabilities of Chicago's four pension funds have grown to nearly $20 billion, which doesn't include the $6.8 billion shortfall at the teachers fund.

The city's pension debt is not only damaging Chicago's financial stability, but also breeding cynicism about government's ability to provide modest pensions to the people who teach the city's children, collect the garbage, run into burning buildings and keep the peace.

"When these plans are misused, there is a price that will be paid by taxpayers and other pension plan participants," wrote Keith Brainard, research director at the National Association of State Retirement Administrators, in an email after hearing of Daley's deal. "But there's another cost, possibly far greater than the financial cost. That cost is the erosion of public support for decent retirement benefits for employees of the state and local government."

Last week Mayor Rahm Emanuel wrote to legislative leaders in Springfield urging them to move forward on meaningful pension reform and outlined four principles the mayor would support, including increasing the retirement age and suspending automatic increases for pension benefits.

"If our pension system is not reformed, Chicago has two roads to take: We can watch each of our funds go bankrupt ... and be unable to pay the hardworking people who have paid into their retirement funds, or we will be forced to raise property taxes by $1.4 billion per year — triple what we now pay toward pension costs," Emanuel wrote to House Speaker Michael Madigan, Senate President John Cullerton and minority leaders Rep. Tom Cross and Sen. Christine Radogno.

In response to questions about a Tribune/WGN-TV story about aldermanic pension perks, Emanuel said Tuesday that broad reforms are needed. "What I don't want to see is that we ... take our eyes off the big change that is required."

Daley left an indelible mark on the city. But Chicago's pension crisis threatens to become part of that legacy, shaping the city's future as much as Millennium Park, the expansions of O'Hare International Airport and McCormick Place, or any of his other achievements as mayor.

His own public pension, meanwhile, will end up costing taxpayers all over the state. Records show that his contributions to the statewide General Assembly pension fund weren't nearly enough to cover the benefits he receives.

Generous laws

The roundabout way that Daley lined up his pension was made possible by a law sponsored in 1981 by then-state Sen. John D'Arco, D-Chicago, who was convicted on federal bribery charges in 1991 and 1995.

Under the law, members who had left the General Assembly but were participating in other Illinois public pension funds could rejoin the state legislative fund for up to four years as long as they did so by Jan. 1, 1992. At the time, the former members had to have at least eight years of service in the General Assembly Retirement System, known as GARS, to qualify.

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