Police Pension Fund on Shaky Ground
| IPSN, June 4, 1997
Chicago Police Pension Fund on Shaky Ground
FOR MORE YEARS than anyone can remember, the Chicago Police Pension Fund has been a political piggybank that has been rigged in favor of the pinstripe patronage boys and a variety of contractors and real estate investors who have all had some kind of close tie to the Fifth Floor at City Hall.
Even though the fund currently has assets of something in the neighborhood of $2.75 billion, Chicago Police retirees and their spouses are currently being required to come up with monthly health insurance payments of $190, or $2,280 each year.
This insurance payment grab, which is only a financial bloody nose compared to the overall hemorrhaging of the Police Pension Fund itself, nevertheless squeezes retirees and their spouses out of something like $9 million a year. And that’s $9 million that was absolutely, positively promised to the retirees when they were still on active duty. The original promise that CPD retirees would always have free health insurance was first made by the current Mayor’s father, then publicly repeated by at least two of his successors.
BUT THE REALLY big deal over at the Police Pension Fund offices at 221 North LaSalle Street is this: that $2.75 billion in assets that Pension Fund Trustee Ken Hauser and his fellow political cronies are playing with is actually some $2-billion less than the Fund needs to meet all of its obligations to retired Chicago Police Officers.
It’s simple math. If you total up all the former Chicago Police who are currently retired, and you include all their surviving spouses, and you then multiply that number by the dollar amount that each retiree and/or spouse is supposed to receive in the mail each month, and you then multiply that monthly figure by 12 to get the annual obligation, and then click into your calculator the total number of years that the retirees and their surviving spouses can be mathematically (or actuarially, as they say in Pension Fund lingo) expected to live, then you learn that the $2.75 billion that Mr. Hauser and the other political appointees are doing sleight of hand tricks with is around $2 billion less than is actually required for solvency.
SO WHERE DO we get this kind of financial data? Well, some of it comes from Ken Hauser’s column that regularly appears in the FOP Newsletter. That’s the same propaganda sheet that’s published by Lodge 7 of the Fraternal Order of Police (or Friends Of Politicians, as they are sometimes known).
Now here’s the really interesting question about the Police Pension Fund and it’s problems. If the FOP is supposed to be representing Chicago cops and looking out for the welfare of their families, why is FOP President Bill Nolan’s regular monthly publication carrying even one word—let alone an entire column—that suggests the Pension Fund is solvent?
According to a recent Hauser column in the Friends Of Politicians journal, “The market value of the Pension Fund is approximately $2,750 billion which is an increase of approximately $300 million over the year of 1995.”
First, either Mr. Hauser does not know how to read a financial statement or FOP President Bill Nolan will go to any lengths to make the Pension Fund political hacks look good. The simple fact is this: there is no way that the Chicago Police Pension Fund has nearly three trillion dollars in assets, period. Then, if they don’t have the $2,750 billion that Hauser claims, can we also believe that they earned $300 million on their 1966 investments. And, if they did earn $300 million last year, why are they still charging retirees and their spouses $9 million for health insurance?
Hauser, who is an obvious friend of Mayor Daley and Nolan, who is an obvious apologist for the Mayor, used the same column in the FOP Newsletter to brag that “funding status of the Pension Fund has increased from 65% to approximately 70% of market value.”
Again, only friends and apologists of the Mayor would ever brag about having a fund that’s worth 70-cents on the dollar. Think about it. Would any Chicago cop who has worked the streets for years, and is now approaching retirement, be happy to learn that the personal savings account that he or she’s been regularly adding money to all these years is now worth 70-cents on the dollar. Would he or she think that’s something to brag about?
Well, maybe Ken Hauser and President Bill are some kind of financial and mathematical whiz kids, and we, the rest of the world, are just not expected to comprehend how a 70-cent dollar is worth as much as a 100-cent dollar. Or, maybe the Chicago Police Pension Fund, and the people who control it, needs a closer look.
WE AT CCPA don’t claim to know everything. But we do know that Ken Hauser’s 70 percent figure is at least 10 points higher than the 60 percent figure that City Treasurer Miriam Santos disclosed was the true figure in a recent interview with Illinois Police and Sheriff’s News. Further, Santos disclosed, that 60 percent funding figure is based on an accounting system that the Daley Administration came up with. When a State of Illinois accounting system is used, the Chicago Police Pension Fund turns out to have assets that are worth only 51-cents on the dollar.
SO, WHO KNOWS? Do we take Hauser’s and Nolan’s figures that the Police Pension Fund has nearly three trillion dollars in it, and therefore enough to pay every current and retired Chicago cop a generous pension forever? Or do we start moving decimal points and commas around and get a more realistic picture of a Pension Fund that’s run by politicians who can’t seem to keep their hands out of the cookie jar?
ON THAT LAST POINT, it was only a month or so ago that Mayor Daley announced a plan to begin funding new City improvements like sidewalk construction and computer upgrading with Pension Fund dollars. However, thanks to the media attention that CCPA President John J. Flood called to that scheme the Daley Administration has, at least for the moment, backed off.
But as we said at the top, the Police Pension Fund has always been a political piggybank. What else is new?