Synopsis: Chicago, The City That Doesn’t “Work.”
Editor’s comment: Research indicates equating Chicago and “work” dates back to Mayor Richard Daley the First. When Mayor Richard Daley the Second took over, he financially pointed the City at an iceberg, similar to the iceberg that sank the RMS Titanic. No one thinks of the Titanic or City of Chicago as “sinkable” but we assure you the Titanic is on the bottom of the Atlantic and our fair City may see the same financial fate. At some point in the near future, like Detroit, someone is going to pull the plug on borrowing and the City will have little choice about whether to sink or swim. If the City doesn’t file for actual bankruptcy under current Mayor Rahm Emanuel, it is certain to be out of cash and informally bankrupt in the next several years. The main “process” problem is they simply aren’t addressing the “root cause” of their municipal problems.
Please remember the City of Chicago is actually a government unto itself and like anything else in Illinois/Chicago government, there are also lots of arcane and “hidden” sister governments. These are all major tax-collecting organizations that are all feeding off taxpayers such as the Chicago Public Schools, the Chicago Park District, the Metropolitan Water Reclamation District, Cook County, County Forest Preserves and the Chicago Transit Authority. The mayor of Chicago has a strong role in managing all such governments. All of these government organizations are wildly in debt and seeing continued turmoil. When you have time, take a look at this link for a study from the Chicago Tribune called “Broken Bonds” that indicates how the Chicago Public Schools borrowed and owed $12B by the year 2013. http://apps.chicagotribune.com/bond-debt/#story3 Please note the Chicago Public Schools remain out of money and just borrowed $1.2B more at 8% interest to make ends meet for this school year. They are certain to be broke next year and the year after that and so on until they act to stop what is causing them to be broke. About three decades ago, some idiot in Mayor Richard Daley the Second’s office didn’t give them a single year’s pay raise and in return forever agreed Chicago school teachers could cut their fake pension contributions from 9% to 2%--this past year, that largesse cost Chicago taxpayers about $170M! If you are following the math, this cost to Chicagoans each decade is approximately $2B. Please also remember Chicago taxpayers also “match” the monies the school teachers aren’t actually contributing to their fake gov’t pensions.
Last year, Illinois Policy reported the City of Chicago and its sister government’s combined debt is a whopping $63.2B. With the added borrowing, they are over $65B by now. Of that debt, fake pensions and retiree health care are about 60% or $37B. Chicago’s fake government pensions are among the worst funded in the nation. Morningstar Inc. reported Chicago had the worst funding ratio and the highest per capita pension liabilities among the nation’s largest 25 cities. All that debt has led Moody’s Investors Service to downgrade Chicago’s debt to just three notches above junk status. Chicago’s bonds are now rated the lowest of our nation’s biggest cities, other than Detroit.
If real pension and spending reform are not enacted, higher and higher taxes will be the only way for the city to stave off insolvency for a while. In the end, higher taxes will only hasten out-migration from the City. Nearly 800,000 Chicagoans have left our city since 1992 and lots of folks continue to leave. One of the fascinating aspects of out-migration is most City retirees leave to have their checks sent to them in other states—they know the high taxes and skyrocketing debt they have caused can only be avoided by leaving!
Mayor Rahm Emanuel’s current “chewing-gum-and-baling-wire-fix” for Chicago calls for a $700M increase in property taxes, taxing cab rides and new garbage fees. All of these hundreds of millions of new tax dollars are to catch up and pay for just two fake government pensions—police and fire. His plan does nothing to actually reform the failed “process” that is killing City governments.
Illinois State and Chicago Municipal Workers’ Comp Defense Programs Remain a National Laughing Stock
Earlier this year, Illinois Policy reported the State of Illinois, as an employer is paying $130M or more in state workers comp costs. We are certain the City of Chicago by itself is paying over $100M in annual workers’ comp costs. Our sources indicate the State had over 25,000 pending lost time WC claims and the City has several thousand. Why are those WC claims and costs so stupendously high? Is it so dangerous to work for the State of Illinois or the City of Chicago?
Please note the lawyers on both sides of the City of Chicago WC matrix—Plaintiff and Defense--contribute heavily to the politicians who select them for handling defense claims or tacitly “approve” them to market the City workforce for Petitioner claims. One WC defense firm has had City of Chicago “emergency” WC defense work for over a decade on a continuing no-bid political deal.
Along with that odd political situation, the main reason for failed and foolish government workers comp defense programs for these and many governments remains their lack of commitment to defending questionable accident claims and, if an bona fide accident occurs, keeping the employee engaged and rapidly bringing them back to work at light duty. Your editor worked for the City of Chicago for seven years and I assure you from that experience, our City has hundreds of seated/sedentary jobs that could be used to return injured workers rapidly to gainful employment. We consider it a national disgrace to report these governments could care less—they are happy to have lots of workers stay off on months/years of TTD and possibly “odd lot” total and permanent disability benefits in a fashion that makes most objective observers in this industry upset. We have heard of city workers, like a truck driver or garbage collectors have routine shoulder surgery and then be given a medium-duty lifting restriction and then be allowed to stay off work indefinitely. At some magical point, someone quietly gives them a giant settlement or puts them on another version of a fake government pension—they are provided lifetime “odd lot” total and permanent disability benefits with annual cost of living increases paid for by Illinois business.
Why Do We Have All This Debt? Fake Government Pensions and Poor Workers’ Comp Defense Programs Create Political Puppets
The first national figure to see the problem with government unions was Franklin Delano Roosevelt. He noted the “union-concept” should work fine in the private sector where there is competition but unions in a the public sector are dysfunctional. In our view, the main reason leaders like IL House Speaker Mike Madigan have created these inconceivably high government pensions with lifetime salary and healthcare benefits is to gain strong political puppets from those closest to him—the government workers who are quietly selected via “juice” or political pull. Even firefighters and police officers who aren’t necessarily selected by political pull are compensated so highly, they rapidly develop political allegiance to their political masters and benefactors. All such workers are on government union political email lists like the address lists for this KCB&A Update. The government union participants are regularly told who to support at the polls and who is “bad” for their futures and pensions.
We want our readers to understand you would be wildly loyal to someone who gave you a well-paid job in City or State government that you only have to work in for a relatively short period of time to become vested and then get paid lifetime benefits with regular annual increases and full medical coverage for life. The worst fake government pension of all is the Illinois General Assembly Pension program where an IL legislator only has to work on a part-time basis for four short years to later be entitled to millions in taxpayer dollars. Try to imagine what a political puppet you would be to someone who helped you get such a job with that level of multi-million-dollar lifetime compensation.
For the same reasons, the poorly run WC defense programs for these governments provide rock-star benefits and lifetime medical coverage for anyone who can construct an “injury” in our previously relaxed IL Workers’ Compensation Commission. For decades, State and City of Chicago workers were treated like royalty and allowed to create and maintain claims private sector employers would have screamed about—the reason no one in State or City government has ever complained is the simple mantra—fake government pensions and poorly run WC programs.
The “root cause” of Chicago’s skyrocketing debt is the trade-off of unfundable pension/healthcare benefits to government workers to breed and foster political loyalty.
Join With KCB&A on Our Workers’ Comp Defense Program FOIA Request
We are considering a Freedom of Information Act Request to the City of Chicago to see how badly run things are. We are asking for YOUR help. We want to ask things like
ü How many employees does the City of Chicago have right now?
ü How many pending IL WC claims does the City of Chicago have right now?
ü What was the total amount paid by the City of Chicago for all workers’ comp costs in the last recorded year?
ü How many WC claims adjusters work for the City of Chicago right now?
ü How many outside claims adjusters work for the City of Chicago right now?
ü What is the process to select and hire outside WC claims adjusting companies for the City of Chicago?
ü How many pro se WC settlements did the City of Chicago enter into with its workers in the last year?
ü How many pro se WC settlements did the City of Chicago enter into with its workers in the last five years?
ü How many litigated IL WC claims is the City of Chicago defending right now?
ü How many lawyers who work for the City of Chicago are defending all such claims?
ü How many lawyers who don’t work for the City of Chicago but work for outside law firms are defending such claims?
ü What is the process to select and retain outside defense lawyers to defend the City of Chicago in your workers’ compensation claims?
ü How much did the City of Chicago pay for workers’ comp settlements in the last recorded year?
ü How many City of Chicago workers are currently on TTD?
ü How many City of Chicago workers have been receiving TTD for over one year?
ü How many City of Chicago workers have been receiving TTD for over five years?
ü How many City of Chicago workers have been receiving TTD for over ten years?
ü How many City of Chicago workers are currently receiving lifetime total and permanent workers’ compensation benefits?
ü Does any City of Chicago Department have a light-duty return to work program?
ü Does the City of Chicago use any in-house investigators or surveillance providers to surveil its injured workers to insure they aren’t working while on TTD?
ü Does the City of Chicago use any outside investigators or surveillance providers to surveil its workers to insure they aren’t working while on TTD?
ü Does the City of Chicago use any WC nurse case managers in its workers’ comp defense program to monitor injured workers and manage their medical care?
ü Does the City of Chicago use a workers’ comp PPP or preferred provider program to insure low medical reimbursements and limit choice of doctors for its workers?
ü Does the City of Chicago use any vocational counselors or certified rehab counselors (CRC’s) to get your workers back to work in as timely a fashion as possible?
ü If so, in how many WC claims are vocational counselors or CRS’s being used?
ü What is the process to select and hire outside WC vocational counselors or CRC’s for the City of Chicago?
Give us your best questions and we will add them to the list. We will also send the folks who send great questions a $10 Starbucks gift card.
Where Do We Go From Here?
Plan A—Start telling the truth. Try to model the City of Chicago and its sister governments after great municipalities, like Naperville and Glencoe. Find a new and dramatically more affordable approach to post-government retirement programs for new and all future workers. Stop paying for lifetime healthcare coverage for new workers like the private sector. Consider combining police and firefighters into one public safety department where you train police officers to fight fires and firefighters to be police officers. Have the inactive firefighters help the police side of the combined force when they aren’t fighting fires. Start combining other city departments and get rid of duplicative, expensive and redundant leadership. Start using staffing companies so you don’t owe pension and healthcare benefits to such workers.
Plant B—Bankruptcy, either actual bankruptcy or virtual bankruptcy where the City runs out of money and can’t pay bills.
We appreciate your thoughts and comments. If you aren’t sure why we call them “fake” government pensions, send a reply. Please post comments on our award-winning blog.
Synopsis: Governor Bruce Rauner Appoints Christine Ory as Our Newest IL WC Arbitrator.
Editor’s comment: Last week, Governor Rauner announced he appointed a former Claimant lawyer to become Illinois’ most recent selection for an arbitration post at the IWCC. Ms. Ory who has always been known as “Chris” is an experienced workers’ compensation attorney, working in the field since 1975. She began her career as a claim supervisor at The Hartford before becoming an attorney.
Until last week, Ms. Ory ran her own law practice, which focused solely on workers’ compensation claims. Prior to opening her own firm in 2005, she was a partner and president of Gabric, Millon & Ory, P.C. She began working in private practice in 1986.
Ms. Ory is a member of the IL Workers’ Compensation Lawyers Association, and is the previous chair of the Illinois State Bar Association Workers’ Compensation Committee. In addition, she has experience as an arbitrator in DuPage Circuit Court. Ms. Ory earned her bachelor’s degree in business from North Central College and her law degree from John Marshall Law School. She is a native of Naperville and now lives in Lisle.
We feel confident Chris Ory will be fair and diligent in her work as an arbitrator.
We are certain of at least one more arbitrator appointment coming and possibly two. We aren’t sure how there are going to be enough IL WC claims for all the arbitrators we will soon have running all over our state!
Synopsis: News from NCCI: No IL WC Advisory Rate Filing for 2016.
Editor’s comment: We have always felt the NCCI IL WC advisory rate filing is mildly misleading. In our experience the advisory rates have almost always dropped, dropped and dropped some more. The problem with NCCI advisory WC rates is just that—they are ‘advisory’ and you can’t purchase IL WC insurance at those rates.
This year, the National Council on Compensation Insurance said in its latest State Advisory Forum for Illinois that it will not make an advisory rate and loss-cost filing for 2016. We assure our readers the NCCI statistical analysis is more significant. Overall, the latest WC experience in Illinois is a mixed bag with different components applying offsetting pressure on system costs. An increase in indemnity severity, higher benefit payments because of inflation and a slow-down in claim closures at early reports are putting upward pressure on costs.
At the same time, indemnity claim frequency declined slightly in 2012 and 2013 and medical severity increased at the same rate as inflation, helping to mitigate any cost increases. The two big questions for Illinois involve the lagging economy and pending legislation A standoff between Gov. Bruce Rauner, a Republican, and Democrats in the House and Senate prevented the Illinois General Assembly from passing a state budget by July 1 or even to present. The Governor and Democratic lawmakers are also deadlocked over workers' compensation reforms.
According to NCCI, several positive trends were observed in Illinois last year. Illinois WC direct written premium increased to $2.8 billion from $2.7 billion in 2013. That is a very minimal increase in IL WC insurance premiums—it is a .37% increase by my math.
The accident year 2014 combined loss and expense ratio was 92%, the same as in 2013. Combined ratios in Illinois dropped under $100 in 2012 for the first time in more than a decade.
Average indemnity claim frequency dropped by 1% in policy year 2013, following a 0.6% reduction in 2012 and an 8.5% reduction in 2011.
Illinois averages 999 indemnity claims per 100,000 workers, compared to a national average of 845 and a regional average of 871. Only Iowa, with 1,050 indemnity claims per 100,000 workers, has a higher frequency of lost-time claims.
Overall claim frequency in Illinois, however, is better. Illinois averages 3,054 claims per 100,000 workers, compared to the regional average of 3,811 and the national average of 3,407. No other regional state had fewer claims.
Average indemnity claim severity in Illinois increased 3.4% in 2013 to $33,000 from $31,900, the highest in the region. Iowa was second-highest with average indemnity severity costs of $26,000.
Average medical claim severity also increased by 1.4% to $31,100 in 2013 from $30,700.
Medical severity or average cost per WC claim in Illinois is lower than Indiana, $34,000, and Iowa, $33,000, but higher than Missouri where the average medical cost per indemnity claim is $28,000.
Since 2013, NCCI recommended a cumulative 15.5% reduction in voluntary loss costs and a 7.7% reduction in assigned risk rates. NCCI notes in its State Advisory Forum the "Illinois experience is very similar to that used in a prior Illinois filing." But it will not make a filing this year. If you want the link to the NCCI report, send a reply.
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