Bloomberg News

Emanuel Reaches Deal With Police Union to Fix Pensions

February 12, 2013

Chicago police sergeants would get a 9 percent pay raise over four years while future retirees would be required to use 2 percent of their pensions to help cover health-care benefits, in a deal announced by Mayor Rahm Emanuel.

“This is the first agreement that has a sensible contract, realistic pension reform and changes how we fund retiree health care going forward,” Emanuel said today at a news briefing about the accord. He was joined by union leaders.

The Emanuel administration has warned that ballooning pension costs may force the city to make deep cuts in government services. Retirement plans will consume 22 percent of the budget -- about $1.2 billion -- within four years, unless the state Legislature restructures them, including adjusting benefits and contribution rates, the mayor has said.

“We have a framework that addresses the financial pressure on taxpayers,” Emanuel said about the agreement announced today, which still must be ratified by rank-and-file members. He said it “is a critical first step and baseline framework for fixing the city’s pension crisis.”

The accord came several days after the city’s larger Fraternal Order of Police union pushed for a 12 percent increase over two years and $3,000 annual “cost of living in Chicago” stipends. Emanuel alluded to the negotiations with the FOP when asked if the sergeants’ deal would affect other city contracts.

City ‘Blueprint’

It’s “a framework and blueprint for all to take note,” Emanuel said. The Chicago Police Sergeants’ Association has more than 1,100 members, according to Kathleen Strand, a spokeswoman for the mayor.

Under the agreement, sergeants would pay 1 percentage point more of their salaries into the pension fund annually for three years, pushing their contribution rate to 12 percent from 9 percent now, according to a statement from City Hall. The rate will decline to 10 percent once the retirement system has 80 percent of the assets needed to cover projected obligations.

The police pension had about 40 percent of the amount needed as of 2010, according to a June 2012 report from the Civic Federation, a Chicago-based nonprofit research group that tracks government finances.

Current retirees’ cost-of-living adjustment would be reduced to 2.5 percent from 3 percent and will be provided only in odd years until 2019, when it would become annual again, under the proposed agreement. Future retirees also would see their inflation adjustments reduced temporarily.

The agreement also would raise the minimum retirement age to 53 from 50. Sergeants retiring before age 64 would receive a benefit of as much as 75 percent of their final salary under the deal; those who retire at 64 would get 80 percent, according to the city.

“I think it’s a very good deal,” said Jim Ade, the union’s president. Still, he said it will be a “tough sell” to get his members to accept the contract.

To contact the reporter on this story: Oliver Renick in Chicago at orenick1@bloomberg.net

To contact the editor responsible for this story: Flynn McRoberts at fmcroberts1@bloomberg.net


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