Tag: pension

Chicago’s Problems Run Much Deeper Than a 76-foot Hole

by Hilary Gowins, posted in huffington post

Originally published on Huffington Post.

The Chicago Spire was supposed to be the tallest building in the United States. Instead of soaring 2,000 feet into the sky, today the foundation plunges 76 feet below ground, sitting abandoned and undeveloped right across from Navy Pier and along iconic Lake Shore Drive. What was to serve as the base for an opulent architectural landmark is just a deep, dark hole taking up prime real estate and reminding the city of what could have been.

The pit is a physical reminder of the unrealized promise of the Spire, but its imagery also reflects the depth of its city’s financial despair.

Behind a veneer of affluence, gilded by the prosperity and staying power of neighborhoods such as the Gold Coast, River North and Lincoln Park, the city’s foundation is crumbling beneath the weight of perilous debt. Chicago and its sister governments are officially on the hook for more than $32 billion in unfunded pension debt. With just over a million households in the city, that staggering figure means each Chicago household is on the hook for $32,000 to cover these liabilities. Chicago’s pension debt exceeds the state’s total proposed operating budget for the upcoming fiscal year.

At the same time the city’s obligations are skyrocketing, its population is growing at a snail’s pace, gaining just 6,000 residents in 2013 after a decade of population decline. With 2.7 million residents as of 2013, Chicago’s population is the same as it was in 1920.

But the city used to be a beacon of hope and prosperity.

In 1884, more than 120 years before the Spire project was unveiled, Chicago became the birthplace of the skyscraper upon the completion of the 10-story Home Insurance Building.

In 1916 author Carl Sandburg gave birth to the nickname, “the city of big shoulders,” a nod to Chicago’s grit and work ethic. By 1890, its population topped 1 million, and it was the fastest growing city in the world. The year before, it had officially become the second-biggest city in the country, according to records from the University of Illinois at Chicago.

Business was booming then, driven mostly by the growth of railroads. Continued rail growth led to the birth of the Union Stockyards, a centralized slaughterhouse built to accommodate Chicago’s growth in the livestock industry. Around 1900, Chicago’s meatpacking industry employed more than 25,000 people and produced 82 percent of the meat consumed in the United States, according to theChicago History Museum. The late 1800s and early 1900s were also the era of the iconic State Street Marshall Field & Co., originally a dry goods store that eventually became one of the biggest department stores in the country.

Chicago was a center of commerce and culture, a booming hub where East met West.

But today, despite activity on the tech front, job opportunities are scarce. The Chicago area has 46,000 fewer people working compared to before the Great Recession, according to the Bureau of Labor Statistics.

In 1851, writers at the Chicago Tribune wrote in the “Annual Review of Commerce” something that still holds true today:

“Essential to the prosperity of cities … It matters but little how great the natural advantages with respect to a location upon navigable water, if [cities] fail to avail themselves of this new element of power, a decline is inevitable.”

Back then the “essential power” was the railroad, and the Tribune writers recognized that this industry would serve as the driver behind future prosperity. Today, economic drivers that would make the city great once more are set backon multiple fronts: the city buries would-be entrepreneurs in paperwork for the fees and permits required to set up shop; it can take weeks or months just to get approval from City Council to start a business; and anyone thinking of opening a business here has to consider the prospect of having to shoulder the city’s heavy debt burden if City Hall can’t embrace reform.

The Spire and those who held its financial obligations filed for bankruptcy in 2013. They owed $77.3 million on the project, according to the Chicago Tribune. Without swift action, the city could suffer a similar fate.

Unlike the Spire, Chicago doesn’t have to keep sinking. If city officials change the way Chicago handles spending and debt, as well as how it fosters business and jobs growth, the city of big shoulders can boom once more.

Illinois General Assembly’s top three legislative priorities

by Hilary Gowins, posted in op-ed

Op-ed posted on Watchdog.org.

2015 promises to be an exciting year in a state desperately in need of major fiscal reform.

For the first time in 12 years, Illinois has a Republican governor. He’ll be working alongside Democratic supermajorities in the House and Senate – and everyone’s waiting to see what happens.

It would take a crystal ball and some strong political connections to accurately predict what will happen in the Illinois General Assembly in the coming months, but at least three fronts are likely to see movement: wages, jobs and growth reforms, and pension reform.

Wages

The Illinois Senate passed in December 2014 a bill that would raise the state’s minimum wage. Politicians may look to pass an increase this session, which would costs employers big. If so, it’s possible that this increase could be tied to other business measures intended to offset the added costs of a wage hike.

This could include: a reduction in LLC fees, which cost each new business that falls under this category $500 in its first year and then $250 each year the business remains active; and reform to the state’s workers’ compensation law, under which employees can file compensation claims for injuries that are not incurred on the job.

Jobs and growth reforms

Though many are anticipating clashes between the Republican executive branch and the Democrat-controlled Legislature, the good news is that both sides have common ground when it comes to issues of employment.One of these bipartisan policy areas is licensing reform. Occupational licenses cost time and money. Today, almost 1 in 3 workers need the government’s permission to do their job – 60 years ago, that figure was just 1 in 20, according to “License to Work,” a 2012 report from the nonpartisan Institute for Justice.

Illinois is no exception when it comes to burdensome licensing rules. For example, under the state’s Barber, Cosmetology, Esthetics, Hair Braiding, and Nail Technology Act of 1985, anyone wishing to work as a barber must complete expensive training at a barber or cosmetology school for no less than 1,500 hours in a program lasting at least nine months before they can even take the state-required licensing exam and pay the associated licensing fees.

“Scope of practice” in health care is another aspect of occupational licensing that has supporters on both sides of the aisle. Seventeen states and the District of Columbia have laws granting “full practice authority” to professionals who have advanced nursing degrees and have passed national exams. This adjustment provides greater access to care for low-income residents and reduces wait times to see doctors and specialists, and also can majorly reduce health-care spending for the Illinois Department of Human Services.

Pension reform

No pension reform will move forward until the Illinois Supreme Court rules on the constitutionality of Senate Bill 1, the pension bill the General Assembly passed in 2013 and the Sangamon County Circuit Court ruled unconstitutional in November 2014. At the end of 2014, Illinois Attorney General Lisa Madigan’s office filed a motion to expedite the court’s ruling, and the court granted this request.

A decision is likely to be finalized in March or April, near the end of spring legislative session.

The sooner the state learns the fate of SB 1 the better, because its $111 billion pension debt will only continue to grow without true reform. No one on either side of the aisle truly believes SB 1 is a comprehensive pension bill – if the court strikes it down, lawmakers will have the chance to go back to the drawing board to find real solutions.

No matter how the court finds, the right thing to do would be to offer all government workers the chance to opt out of the failing pension funds. Nearly 20 percent of state university employees chose to enter a 401(k) plan instead of the State Universities Retirement System, or SURS, pension fund in 2014. But SURS is the only state retirement system that offers employees that choice.

The surest way to stop the bleeding is to enroll all new public employees in self-managed plans going forward. This move is constitutional, would save the state immediate millions and would protect worker retirements.

Illinois is a state rife with policy problems, and it’s tough to predict where momentum might shift. But in terms of combined importance and immediacy, these three issues sit atop the pile for state lawmakers in 2015.