Repost: Mayor Johnson and the city's public pension debt.
Thursday's post only went to paid subscribers. Here it is, available to all.
Mayor Lightfoot broke with recent Chicago mayors by making payments to to the city’s pension funds by paying more than a $1 billion in the last three years to meet statutory funding mandates.
As I have explained here before, a statutory mandate is simply made up by politicians. Actuarial payments are what are needed to meet the cost of the pension obligations the government owed to public employees.
To Lightfoot’s credit, her administration went further than simple statutory payments by putting in $242 million more than the statutorily requirement in the 2023 budget. Lightfoot also advanced roughly half a billion dollars to its funds starting in late 2022 to prevent them from selling assets during a market rout.
The increased pension funding led to credit upgrades, including one in November from Moody’s Investors Service that lifted its rating from junk to investment grade for the first time since 2015. The previous month, Fitch Ratings had raised the city’s credit by one level to BBB with a positive outlook.
Brandon Johnson, who I voted for against Paul Vallas, campaigned for Chicago mayor promising that he would do better.
Regarding public pensions I have high expectations for the mayor-elect.
Johnson was a Chicago public school teacher and an organizer for the Chicago Teachers Union. His transition team is headed by Jessica Angus, vice president and chief of staff at SEIU Healthcare Illinois. His senior advisers will be campaign manager Jason Lee, a former investment banker who has worked with progressive unions, and Amisha Patel, former executive director of Grassroots Collaborative and Grassroots Illinois Action. Erica Bland-Durosinmi and DJavan Conway will serve as intergovernmental advisers. Bland-Durosinmi is executive vice president at SEIU Healthcare. Conway leads Conway Consulting Group, a business advisory firm.
I see that Conway is a former staffer for the indicted former Speaker Michael Madigan.
Johnson’s legal adviser is Maria Virginia Martinez, who works at law firm Croke Fairchild Duarte & Beres who previously served under Mayor Lori Lightfoot.
So, you can see why I would have high expectations that Mayor Johnson would follow Mayor Lightfoot’s lead in reducing the unfunded pension liability of the city’s public employees, most of whom are union employees.
In addition to the current pension debt, Mayor Johnson will also need to address the issue of Tier II.
As I have written about often, when the Democrats in the Illinois legislature created a Tier II pension category for all public employees hired after 2010, they created a time bomb.
As they begin to retire soon, their pension benefit will not meet federal requirements of “safe harbor.”
The state, Cook County and the city of Chicago will all be on the hook for billions of dollars in back pension payments.
It appears that County Board President Toni Preckwinkle might be trying to get ahead of the issue.
Johnson, as a member of the County Board with close ties to Preckwinkle and as a leader of the CTU which had close ties to Madigan, he will hopefully also see the need to get ahead of the Tier II issue.