An alternative view of our Union and Pension Fund
Let’s face it, this department runs on rumors. The less concrete information the City or Local 2 puts out the more these rumors take up legs and start to walk and talk at the firehouse kitchen tables and morning roll call. One rumor I have heard recently is that Local 2 and the City of Chicago are close to a contract. I’ve asked every steward I run into what they are hearing about the contract and all I hear is “we’re told it’s close and might be by the end of the year.” The current rumor is that the contract proposal is over 5 years and is for 20%. I don’t know if it is true. I also don’t know how the increases are spread out over the alleged contract. When I hear people talking about this alleged contract proposal the response is either – “How much is my retro going to be?” or I hear, “My money doesn’t buy what it used to buy”. My concern, and what I think every member’s concern should be, is that our economic well-being in this high inflationary environment is on shaky ground.
Some facts:
- Local 2 members have been without a contract for over two years, since June 30th, 2021
- A common source of measuring the rate of inflation for workers and retirees is the U.S. Department of Social Security Administration’s Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
- From January 2021 to December 2021 the CPI-W index went up by 7.3% and our contract provided a 2.5% salary increase.
- From January 2022 to December 2022 the CPI-W index went up by 5.3% and Local 2 members have not been provided a salary increase for this period.
- From January 2023 until September 2023 the CPI-W index went up by 2.96% during this 9-month period and Local 2 members have not been provided a salary increase for this period.
Additional information:
- I have not been able to confirm it, but I believe the Fraternal Order of Police (FOP) currently has a contract which stipulates a 2.5% salary increase for each calendar year of 2022 and 2023.
- It was recently reported that the FOP and the City agreed to salary increases of 5% for calendar year 2024 and 2025 and a range of between 3-5% for both calendar years 2026 and 2027, depending on the rate of inflation.
To illustrate the lost purchasing power inflicted on the membership during this high inflationary period, I took a 10-year FF/EMT salary and calculated what this membership salary increase is versus what is required just to keep pace with inflation. A 10-year FF/EMT was earning $99,390 in 2020, I rounded up to an even $100,000 to make the analysis simpler.
As you can see in 2021 that $100,000 base salary increased to $102,500 during the year but inflation went up by 7.3%, meaning the Local 2 member needed to earn $107,297 to maintain their purchasing power in 2021. Instead, this member had to come up with $4,797 in 2021 to hold the line on inflation and maintain their standard of living. Because the CPI-W index increased by 5.34% in 2022 and Local 2 members were without a contract, this member had to come up with another $10,527 in 2002 for a cumulative shortfall of $15,324 over those two years. And even though we don’t know the full impact of inflation for 2023, as of the end of September the CPI-W index has gone up approximately 2.96%, reducing this member’s buying power by an additional $13,874 thus far in 2023 for a 3-year cumulative loss of $29,198.
If I ran the same scenario for the Local 2 President, who is a F6B with 37 years of service and would be earning a salary of $161,022 in 2020, his cumulative decline in purchasing power over the same 3-year period is $47,014. With a loss in purchasing power like that, clearly the Local 2 President must be feeling the pinch of inflation like the rest of us.
Taking the example of the 10-year FF/EMT further, let’s look at what happens if the Local 2 Executive Board can negotiate a slightly better salary increase than the FOP, let’s say 3%, for both 2022 and 2023.
Even if a better salary increase is negotiated and Local 2 member’s get a 3% salary increase for 2022 and 2023, this 10-year FF/EMT is still going to be denied $19,880 of purchasing power during this 3-year period. You might be asking – why would this member lose purchasing power in 2023 if the hypothetical salary increase is about equal to the CPI-W index? The answer is because of the shortfall in raises the members received in the previous two years; that loss of buying power is permanently baked into the Local 2 salary schedules. Unless Local 2 can claw-back the salary diminishment they concede, the membership will incur that loss of purchasing power for their families indefinitely going forward, not just in this 3-year period discussed.
I think it was Ronald Reagan that asked the American people during the 1980 presidential campaign during unprecedented inflation – “Are you better off now than you were 4 years ago?”. Well, I think we all know that answer if we asked ourselves the same question.
So, a reasonable question becomes, what would Local 2 need to negotiate to keep the membership’s buying power steady over this 3-year period? Well, since the 2021 salary increase has already been negotiated, the 2022 and 2023 salary increase would need to be approaching 7% for both years to keep up with inflation.
I want to point out that there is more than one way to calculate period over period changes in the CPI. I utilize the raw data provided by the U.S. Department of Social Security Administration and just calculate the percentage change from the beginning of one annual period until the end of that annual period. Other analysts might use a different method. You may see official COLA increases for social security recipients that are different from mine, for example the Social Security Administration (SSA) awarded a COLA of 8.7% for 2023 compared to my 5.34%. The reason is that the SSA calculates a period change based off the 3rd quarter average. The difference in the methodologies boils down to timing. The bottom line is that inflation has gone up substantially over the last few years and the membership can feel it.
I mention this difference because I have had Local 2 Executive Board members or stewards, on many occasions, publicly state some of my previous analysis has been patently wrong. For example, I wrote a newsletter that the City is essentially stealing money from our pension fund by diverting resources into other ‘pet projects’. In my analysis I used publicly available data provided by licensed CPAs and actuaries that were independent of the city and pension fund. So, I was surprised when the former Local 2 Public Relations Director came to a pension fund meeting and stated that my analysis was “misleading information” with “misleading supporting statistics”. He then went on to state that he has worked hard and made tough decisions as a former pension trustee at a suburban fire department. I’m sorry, but that experience does not compare to the independent analysis of licensed professionals with decades of education and experience behind them. It amazes me that honest analysis and simple math can be so difficult for some members on the Local 2 Executive Board.
On another occasion I published that there had been a felony theft that occurred at the pension fund, a matter I think any astute fund member would want to be made aware of. This wasn’t just my professional opinion; it was reviewed by the entire Retirement Board and pension fund staff. The matter was reported by the pension fund to the Cook County State’s Attorney’s Office as required by state statute. Nevertheless, the former 5th District Business Agent was all over social media saying that the felony theft never occurred and that I was a liar. After I made the public records available to the membership which supported my statements this BA became suspiciously quiet. Yet even with all the compelling publicly available evidence supporting that this theft did occur, we still have Local 2 Executive Board members either denying it ever happened or just entirely ignoring the matter altogether.
And finally, when many Tier 2 members inquired about the differences between Tier 1 and Tier 2 benefits, I wrote a newsletter illustrating the differences. That newsletter can still be found on the ourcfd.com website top menu; I will stand by that analysis and narrative. But again, Local 2 felt threatened and sent out some go-along uninformed steward to malign the analysis. This steward didn’t offer any analysis of his own or indicate where my analysis was incorrect, he just heckled and jeered and offered nothing meaningful to the issue at hand.
I have been very vocal about Local 2 being too comfortable aligning themselves with politicians who adopt and implement imprudent fiscal policies that do not focus on core services or maintain a healthy balance sheet for our City and State. In general, public union’s historical alignment with these politicians and their unwillingness to secure funding for our pension funds has contributed to this fiscal crisis. And it is these very fiscal constraints that the current city administration is going to use to argue the City can’t provide Local 2 members adequate pay raises to keep up with inflation. Elections and poor decisions have consequences, and any contract that doesn’t include salary increases approaching 7% in 2022 and 2023 hurt the Local 2 membership. It is incumbent on every member of Local 2 to hold the Executive Board to account for how they spend our money and implement strategy to secure our financial future. Stay aware and be safe,
Fraternally,
Lt. Timothy McPhillips
