Emanuel to Slash Teacher Pensions

In his annual budget address last week, Chicago Mayor Rahm Emanuel launched a campaign attacking the pensions of teachers and other public sector workers. In the speech, he threatened that property taxes would have to rise 150% if pensions were not reigned in, as pension costs would soon eat up 22% of the city’s budget, the WSWS reported this week.

Emanuel did not release any concrete details about the plan, but his Roadmap to Retirement Security, released in May, included a ten-year freeze on cost of living increases, a 5% increase in employee contributions, a five-year increase in the retirement age, the imposition of private plans (like 401Ks) for new hires, and no increase in the city’s contributions until the system is “reformed.”

Illinois state legislators are in agreement that pension costs must be slashed, but have been unable to enact any changes due to political fighting and maneuvering.  The Democrats want to transfer financial responsibility to local school districts, something Emanuel has supported since Chicago is currently the only city that funds its own teachers’ pensions (the Chicago Teachers’ Pension Fund). Thus, Chicago taxpayers currently pay twice, once for their local teachers’ pension fund and again, through state taxes, toward the state fund.

Republicans oppose this plan because it would shift the burden to suburban and rural districts, many of which they control. According to the Illinois Policy Institute, shifting the pension costs onto the districts would increase their expenditures by 3.7%. This could lead to massive spending cuts, which would likely result in layoffs, increased class sizes, reduced course offerings and other cutbacks that directly affect children.

Emanuel’s plan is part of a larger national movement to impose austerity on working people by increasing their share of the tax burden and decreasing the services and benefits they receive in return. Illinois is one of the battleground states for this movement. The credit ratings agencies have given the state the 2^nd lowest rating in the U.S. (after California) and have demanded pension “reforms” as a necessary step toward restoring their credit rating. According to the WSWS, the Chicago Board of Education also had its credit rating lowered because of pension costs.

Brown to Public Employees: Work Until You Drop!

Your Excellency, Please Let Us Retire (Image by Mike Benedetti)

California Gov. Jerry Brown’s plan to cut pension costs would force new teachers to work years longer before they could retire and give them substantially smaller pensions. Those of us currently employed at schools would have to pay roughly 1% more out of our paychecks toward our retirement, amounting to a 1% cut in take home pay. However, the increased costs for teachers could end up being more than 1% if CalSTRS lowers its expected rate of return according to Topics in Education.

Teachers unions heavily supported Brown’s run for governor, giving him millions to support his campaign. They naively believed he would support their members’ interests, despite a well-documented history of violent union-busting and charter schools promotion as mayor of Oakland. Brown repaid the unions with trivial gifts, like appointing a CTA lobbyist to the state board of education and not slashing education funding as much as he could have. However, his attack on teachers’ pensions and the reduction in living standards it will impose on both working and retired public sector workers should have the unions preparing for a General Strike!

The pension “reforms” would significantly decrease benefits, especially for new workers, and raise the retirement age from as early as 55 for some public sector workers to 67 for all new employees who aren’t involved in “safety” work. The plan would apply to all public employees, including state, local, municipal and education workers.

In a particularly absurd statement, Brown said at a press conference that “The plan will make the pension system more sustainable and fair to taxpayers and the employee.”

The plan would supposedly cut the state’s pension costs by billions of dollars over the next 30 years, according to Topics in Education. However, making people work longer, retire on less, and earn less on the road toward retirement is the exact opposite of fair to employees. To be totally honest, it would screw employees!

As it is, no one can survive entirely on a teachers’ pension in most Californian cities. Thus, most retirees must continue working part time, move to a cheaper part of the world, or be fortunate enough to have other investments or a wealthier spouse or partner. Cutting benefits will only worsen this.

The “reforms” will also drive down living standards for working teachers who have seen their take home pay slashed repeatedly over the last three years in the form of increased healthcare premiums, furloughs and, in some cases, wage cuts. The vast most were not earning that much to begin with. Another 1% reduction in take home pay means that many teachers will have trouble making ends meets and supporting their families.

Furthermore, the less one earns today the smaller their future pension. Since pension benefits are based on an employee’s salary during the final years of employment, and raises build up over time, pay cuts now significantly reduce the potential pay during those final years. Virtually no California teachers have had a raise in the last three years, thus reducing this potential for most teachers, while some of the cuts to take home pay may also contribute to this reduced pension potential.

The plan can hardly be considered fair to taxpayers, either, as the majority of taxpayers are low and medium income workers who contribute a higher percentage of their income toward taxes than do the state’s 600,000 millionaires. Fair to taxpayers would involve the wealthy paying substantially more, which would improve the state’s fiscal health, giving it much more flexibility to deal with its numerous budgetary problems, including pensions. Furthermore, the public sector pension “crisis” is the result of fiscal mismanagement by taxpayer-funded pension managers who continue to bungle on in their current jobs at taxpayer expense, combined with the economic crisis, which was due in part to the illegal activities of bankers and investors who have so far paid nothing in penalties or restitution.

Meanwhile, Brown’s plan would do nothing to address the pensions’ unfunded liabilities, which are entirely the state’s responsibility. If the courts require the state to start pay them down, it could result in an enormous increase in its share of the contributions to public pensions, which would directly affect taxpayers.