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🎶hello darkness my old friend🎶
...a few comments about the annual annuity increases, also referred to as the COLA
...a few comments about the annual annuity increases, also referred to as the COLA
First, police and fire do NOT have a compounded 3% COLA--these two funds account for ~51% of Chicago's pension liabilities. Only municipal employees and laborers have had 3% COLA
Second, that 3% COLA was only applicable for people hired before Jan 1, 2011....everyone else is now in Tier 2. Tier 2 COLA isn't compounded, and is designed to basically guarantee retirement income doesn't keep pace w/inflation 
so let's now turn to the history of the 3%, compounded COLA (remember only applicable to 2 of the 4 funds). It was set in 1998. What did things look like at the time? well both labor and municipal funds were pretty well funded (see funded ratios from 2000 in chart below)
the legislation that created the 3% compounded COLA is PA 90-766. That law increased the benefits while 🅲🆄🆃🆃🅸🅽🅶 the city's contributions...so basically cannibalized the high funding the systems had at the time
At the time, and until v recently, the city's contributions were a multiplier of employee contributions. for every $1 municipal employee put in, city put in $1.25. This was already bad because it meant city's contributions weren't tied to cost of benefits or unfunded liabilities
To me, the 3% compounded COLA isn't the root of the problem, it's that lawmakers chose to enhance benefits while 𝓭𝓮𝓬𝓻𝓮𝓪𝓼𝓲𝓷𝓰 the city's contributions and have those contributions be totally de-linked from the pension funds' finances...and not changing for years
the problem snowballed and snowballed, compounded by the recession.
changing COLA would mean changing benefits for Tier 1 members of 2 systems...there has been several attempts at cutting benefits, each one struck down by the state supreme court.
changing COLA would mean changing benefits for Tier 1 members of 2 systems...there has been several attempts at cutting benefits, each one struck down by the state supreme court.
Supreme court's ruling in the cases has essentially been that whatever laws are in place when person joins public pension system---like a 3% compounded COLA---are what's protect /fin
ugh wrong chart in above tweet 😑 in 2000 municipal fund was about 95% funded, labor was over 100%
another thing to add is that Public Act 100-23 created a third benefit tier (Tier 3) for municipal employees and labor. Tier 3 COLA is same as Tier 2. tier 2 and 3 comparison for municipal is here meabf.org/legislature
PA 100-23 was the BIMB for the fiscal year 2018 budget
PA 100-23 was the BIMB for the fiscal year 2018 budget
