Thanks to state pension rules, Evanston is likely to see more leadership turnover if the City Council tonight adopts its new budget with the planned 5 percent pay cuts for all management-level city workers.

City Manager Wally Bobkiewicz says a number of division-level managers are likely to decide to retire rather than take the pay cuts.

Thanks to state pension rules, Evanston is likely to see more leadership turnover if the City Council tonight adopts its new budget with the planned 5 percent pay cuts for all management-level city workers.

City Manager Wally Bobkiewicz says a number of division-level managers are likely to decide to retire rather than take the pay cuts.

The retirement decision makes economic sense for managers who are near retirement age, because under state pension rules their retirement benefits are based on the salary they were earning on the date they retired.

So a 5 percent cut in earnings under the new city budget would mean a 5 percent lifetime reduction in their pension benefits.

Many other pension plans instead base retirement pay on an average of earnings over several years, or on a worker’s highest-earning years.

The move may be least likely to affect the city’s top department-level managers, since nearly all of those positions turned over when employees were offered early retirement incentives two years ago.

But of the more than two dozen people who manage divisions within city departments, Bobkiewicz says he already knows of at least two people who plan to leave if the pay cuts are imposed. And another source with ties to city government says the count could be twice as high.

Bill Smith is the editor and publisher of Evanston Now.

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6 Comments

  1. Let them go
    These managers can always be replaced by newer, less expensive managers. With unemployment at 10%, there will be plenty of highly-qualified applicants for these positions. These applicants will be willing to work for a 25% or greater discount to what the current managers are paid.

    Alternatively, we may learn that it is not even necessary to replace some of these positions, as we may find that the workload of the retiring managers could easily be absorbed by others. This will save the taxpayers 100% of the retiring manager’s compensation.

    The only negative impact that I can see is the huge pension obligation burden these retiring employees will have on the City Budget due to their extraordinarily-high pension benefits. This pension problem will be solved down the road via one or more of the following avenues: Chapter 9 bankruptcy, amendment of the state constitution, or a special punitive tax on pensions exceeding a certain annual dollar amount.

    For the short to mid term, however, I predict that the departure of these managers will have zero measurable impact on the quality of life of the residents of Evanston.

  2. 401k for new city employees and existing employees ?
    Given the pension plan is in deficit, it is probably not possible to switch existing employees to a 401k until the plan is funded.
    However can all new employees be put under a 401k instead of a pension ? Private companies have been using and even switching employees for years. Government employees should be able to do so also.

    1. Great idea, BUT
      From what I’ve read, the pension benefits are dictated by state law. Therefore, the City does not have the ability to just switch to a 401k-type (defined contribution) plan. So, basically the whole system is set up to screw over the taxpayers for the benefit of the largely-unionized municipal employees.

      Now who do you think lobbied for that state law mandating pension benefits for all municipal employees? Hmmmmm……

  3. 5% pay cut? Big deal. I know
    5% pay cut? Big deal. I know plenty of people who lost their jobs in the private sector. I know even more people in the private sector who have 20% and 30% paycuts for the past 12 months. Maybe the City employees should get some perspective.

  4. Managers are not the only ones looking at pay cuts
    All non union staff will absorb pay cuts, and all of them will be faced with doing significantly more work for reduced pay. This can lead to an exodus. Keep this in mind when staff is unable to respond to requests in a timely manner, or when programs that you dearly love quietly dissappear. Less experienced folks, while cheaper, tend to take a while to come up to speed, so you tend to get less productivity out of them until they figure things out. And recruiting costs money.

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