>> hi, i'm lisa fletcher, and you're in "the stream." detroit is not alone. chicago's public pensions are short $28 billion and the city that works is in trouble. our digital producer, ra raj is here, and most people are familiar with detroit's crisis, but chicago's is whooshes. >> people have been streaming:.

however, on facebook, we have the flip side: >> yeah, and there's a lot of subtext to this covering. >> it would be easier if michael jordan came today. >> it would be nice, right? a super hero? the city's pension systems for the police and city laborers were sort by $20 billion by the entof 2012. and to put that in perspective,

for every dollar owed. there's only 20 cents in the bank, and that doesn't even include the teachers, which has it's own $8 billion shortfall. so that all adds up to that $28 billion hole that we were talking about. just this month, the state legislature put into law rules that will help to fix it. elaine has been active on the new legislation. and joining us, fred, a retired k-5 art teacher out of chicago. the former president of the district's 54 parkridge association. in our google hang out, tony martin, firefighter and secretary for the firefighter's benefit fund of chicago. and if investigation with the better government's association. weapon to all of you.

so representative, earlier this month, the legislation passed a pension reform bill, but chicago was not included. and give us the highlights of how the state is trying to solve the problem and why chicago is not in the process. >> the state has a $100 million liability that was putting a squeeze on the rest of the budget. so just in the last two years alone, out of our revenue expenditures, the pension had increased $2 billion just in the last years, and we devoted 22 cents of every tax dollar to making our pension payment, while most states in the country are in the 4 to 5-cent range. so we needed a plan to allow us to pay down that debt over the next 30 years, and i think that we have a sound plan now that will allow us to do that. the city of chicago has it's own

pension funds, as you mentioned, and we have a think the sense was that we wanted to come to some conclusion on the state funds before we would turn our attention to the city funds. but i think their payments are increasing dramatically and having a very dramatic squeeze on their ability to provide other current city services >> and also, the state to put a plan in place to help chicago, or can chicago choose to act independently? >> the city's funds are state statutes, so it will require with the legislature. with local pension funds, we have the county-wide reclamation district. and they came with their own plans, and came to us and we passed them. >> so bob, with detroit and other cities, this is not something that happened overnight, but are there key

factors that you can point to that are major contributors to this crisis. >> i think that the biggest factor is that it was a problem that was ignored way too long, and as a result, a lot of the problems piled up. you have the fact that the pension funds were not funded properly for years at a time. and in addition to that, it may not be realistic, and when you put it all together, you have a real problem, and then the backdrop, a weakening and slowing me, and this is one of the reasons that this is such a flashpoint for the general population, they see their paychecks getting small for their bills going up, and they look at public employees, and the pensions that they're supposed to be getting, and they're angry about that. not always justified. but they're definitely angry about it. and you saw that in the state of

illinois, where there was an an awful lot of push back on the reform. >> we have seen that. tony, you're a firefighter in the nation's third largest city, and did chicago make promises to you that you feel they're not going to keep? >> first of all, i would like to address something that i have said. number one, the mayor and the commission came out and said that our benefits are much more generous and we contribute more on average to pay for our benefits. i believe that we can resolve this issue. we have never not been here. our pensions almost went broke from 1837 to 1981. in 1981, we started a new system. the secretary treasurer said that we would be broke in the year 2013. and just like the firemen, we're

still standing. we have big challenges. >> lisa, illinois residents are upset: >> chicago's pension fund is underfunned. but it's not because of its employees of our employees have faithfully paid into the fund for the past 118 years, never missing a payment. but the schools skipped their

payments from 1996 to 2005. and then they got a pension holiday from the illinois legislature of $1.2 billion. and that's why we're in trouble these days. >> fred, i want to bring in the conversation, you are a retired teacher and talk to us. who would you blame for this crisis? >> the state legislature. for the last 60 years, the republicans and democrats have failed to meet their obligation into paying into their share of the pension fund. those of us like myself, who taught for 30 years, we got hired under the understanding that we would pay 9 and a half percent out of our salary into the future retirement system, run by the state of illinois. that we would invest that money and get a return, which they have, and that the legislature would pay their share. the legislature has not paid their share, and they have not paid it for decades.

representative makes it sound as if -- and bob kind of suggested that everyone is to blame. but the employees aren't to blame. the state employees aren't to blame and the teachers are not to blame. what we did, we signed a contract in which we were guaranteed a certain percentage of our sally when we retire. and a 3% cost of living adjustment. representative has decided that the driver for the economic problems in the state of illinois is the retired teacher down in paducha, who might be 70 years old, and gets a pension of less than $40,000 a year, and a cost of living adjustment, which is what their bill took away that it's somehow going to solve the problems of the state. and it's ridiculous. >> hang on, and pause there for

a second, fred. and i want to get the representative in here. you were the first to agree that the problems with illinois, they have had a funding problem for decades, but is it a reasonable representation on the part of illinois residents to expect at some point, over the last 10, 20, or 40 years that someone in the state legislature would have said, hey, guys, we have a problem here. and we need to hold up and fix this before it gets worse. how could this possibly have snowballed for decades? >> it has always been my goal to not fix the blame, but to fix the problem. and the facts are what they are right now, and i agree that the teachers and the state employees and the university employees faithfully paid in, and they didn't have any choice in that matter. and the state didn't make it's required payments and was never required by law to do so.

and that's one of the major fixes. >> representative, is that how it happened? because they weren't required to do it by law? that they sort of shrugged and said, there's a problem, but we're not required to address it by law. >law. i realize that you weren't part of the legislature 10, 20, 30 years ago, but in your estimate t. is that what happened. >> i don't know if it was the pension systems or the leng similarities, or governors, we have never looked to the actual waries to tell us what is required to fund the pension system and how to get there. over the next 30 years, beer on a scheduled plan, with no gains to get us the funding in 30 years. >> representative, you have found someone to blame, because

the only ones paying are the employees in the state retirement system. nobody else is paying other than what they were originally required to pay. it's those of us who were either retired or will be retired who are the only ones paying a price for 60 years of fraud. we had a contract. >> can i respond? >> you violated that contract. >> of the $100 billion that is owed right now, $79 billion is still going to be paid by taxpayers. and that debt is going to have to be paid by taxpayers over the next 30 years. so of the $100 billion, almost $80 billion, we did not touch. and that's going to be required to pay by taxpayers. >> we need to get to break. we're going to get back to the conversation in 2 minutes, i promise.

still ahead, the dollar figures that we're talking about are in a lot of ways too big to wrap your arms around. when we come back, retirees and younger workers caught up in a broken system.

>> i'm a scientist at nrdc. and i'm in "the stream." >> welcome back, and we're talking about chicago's $2 billion pension crisis at the end of 2012 alone. the city's retirement accounts were just 36% funded. for firefighters, some experts say that their funds, which

currently support 4,000 retirees, could be dry in less than a decade. tony, many city workers see taking a little less salary while they work, and the payoff is security when you retire. what does this breach of contract between the government and it's employees mean for day-to-day life between you and your colleagues? >> well, we have already gone through -- new hirees will be getting a different benefit. number two, the city doesn't have to pay the workers [ unintelligible ] in the united states, you open up a business in chicago, and i have to pay social security. and pay a benefit pension plan. we're being led to believe by

the association and others that we're greedy, and though it's not fair or accurate, and it's not decent. >> the fact that -- excuse me, that's not the posture and it has never been. our interest is in areas where there has been excess and abuse and corruption. and there have been instances of that. >> give me an exactly. >> how about the union leader who spent two days in streets of sanitation, and he was able to get a full pension. >> we're talking about the chicago fire department. >> actually, i don't think that the chicago fire department has that big of a problem. though you have a commissioner who got two extra years of credit, though he wasn't on the job, and he was able to sweeten his tension by thousands of dollars. >> there are a lot of individual circumstances, but fred, i want

to get back to you, you decided at age 30 to move into the private sector, and you've been retired for 1 months, and how does retirement now square with the vision of what you thought retirement was when you were 30, 35 years old? >> first of all, when i began teaching 32 years ago, i was already vested in social security. and when i became a teacher, i lost almost all of any social security benefits. so as of now, i get almost nothing in social security, though i was totally vested when i changed to teaching, and then i taught for 30 years, paying 9 and a half percent into the fund with the assumption that i was taking a lower salary as a teacher than i would have gotten in the private sector, but teaching was a community -- i had the sense of community and responsibility and i taught for 30 years, and then a year and a

half after i retire, representative and the general assembly, signed by the governor, took away what will amount to somewhere between 25 and 30% of what my retirement benefits would be between now and what i hope will be my 85th birthday. >> what percentage, deduction, fred, mean? so explain to us, i want people to get a grasp of what this means when we get down to the nitty gritty. 25-30% reduction and what does that mean for your family and the way you live? >> in the year, in a couple of years before mretirement, my wife and i sat down and decided how to live healthy. i live in a small house, and i don't have a lot of debts, but to lose 30% of any income over

the next 20, 30 years is a major hit. just the cost of living adjustment is exactly that. it's 3%. when i first got hired, the inflation rate was somewhere between 8 and 9%, and now it happens to be low. but we know that the cpi goes up and down, and that 3% cost of living adjustment was just about what the cost of living was over the last 20 years, and now representative and the general assembly have reduced that so i'll get between 900 and $700. >> representative, i want you to chime in. here's ivy on twitter:

representative. >> to go to you and talk to us about the millennials, in their 30s and 40s right now who aren't retired. the firemen and the teachers. how are they paying for their retirement when they don't even have savings? >> what i would say to those folks, what they cannot rely on right now u. the pension systems as they are to continue to exist and be available for them at all because of the fact that we are putting such a great amount into the pension systems that we can't afford other state services or we can't afford the other state services that we weren't able to fully fund the pension. so my goal is to find balance

for those, to make sure that the folks in their 20s and 30s, that there's a system for them to look forward to. and if i can say that his check that he's receiving now is not going down. his increases going forward will be smaller, and when he accepted his job back in 1983 or 1981, it was not compounded. it was only 3% flat every year. >> you're not telling the truth. the only ones in this matter, the other thing that you did, that you're not telling the viewers, is that you raised the retirement age for current teachers. which means that you're going to have teachers working until they're 67, which means that -- >> that's factually incorrect.

>> these are people at the top of the salary schedule. and you have teachers that are not going to be able to get jobs. >> really quickly, we have to go to break. representative, politicians are demonized. and you are taking the brunt of the blame because you're the only one on the show. tell us what it was like from a political perspective, not a human perspective, when you and your colleagues had to make these tough decisions. >> it's very difficult. and no one takes pleasure or joy in doing what we did, and impacting retirement benefits. but the fact that the retirement systems in the long-term are at risk, and education funding and higher education and healthcare funding is at risk. so finding some balance between those two is where most legislators came down on the question. the question, is there a solution that protects all of the people in the system? keep tweeting us, and if you

think your state is safe from a similar crisis, you will definitely want to stick around for what's next.

>> welcome back, chicago's mayor, ron immanuel, says that

if the city doesn't change retirement benefits and changes, chins will see a cut in vital services, and do you see a way forward here where everybody gives in a little to mitigate some of the damage. >> you have to understand, the city doesn't have the same problems that are just with the state of illinois. the state of illinois is paying 20 cents on the dollar toward their pension plans, and the city of chicago is paying 5 or 6 cents. we're going to have to pay $300 million more. to suggest that the city doesn't have room in order to pay is ludicrous. i think when we all sit down and work together, we are going to be able to come up with a solution that's fair to everybody involved. but obviously, what's important to me is upholding article 13,

not reducing or diminishing benefits for current employees. there's nothing to take for us. most of us don't have 3%. we have 1 and a half percent for age 60. >> chicago, stockton, san bernardino, and riverside, and san jose and new york, they have some pension problems. but talk about the nation, and what people predict to be a wave of bankruptcies coming. >> they're probably early indicators, because they're all running into the same problem. when we look at it nationally e. from rhode island to california, you're looking at unfunded pensions and the train on budgets, whether it's state or county budgets. there has to be a way to

rationalize the system. i agree with tony, there's a way to find an answer to this. there's a political way to do it, and it can be done. the issue to me, you have to balance it between the cuts, and then the revenue side. and i think the question in illinois that's going to come up next is, what do you do with a temporary state income tax hike that we have? does that become permanent? you have to start addressing the revenue issue as well. and i think that has been part of the discussion that has been somewhat ignored as we focused on cuts and trying to get on the good side. >> bob, i'm going to get to chicago:

>> what would you sigh as a short-term solution to save illinois? >> short and long-term solution on this is very simple. you had a situation in illinois where the richest man in illinois, ken griffin, a friend of the mayor, he's the richest man in illinois, and he pays the exact state interest rate as an associate of wal-mart. >> i want to thank all of our guests, until next time, raj and i will see you online at aljazeera.com/"the stream." with

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