Annual Financial Analysis
City Workforce

City Workforce

The services that the City provides – from police protection and firefighting to street paving and running public libraries – are all made possible by City employees. The City workforce is made up of front-line employees such as police officers, laborers, and librarians, as well as trade and administrative employees that provide the support necessary to deliver those essential services. The costs associated with this workforce comprise the majority of the City’s expenses across all funds. The details provided in this section include workforce information and personnel costs across all of the City’s funds.

Personnel Costs

Personnel-related expenditures, including salaries and wages, healthcare, overtime pay, workers’ compensation, and unemployment compensation, vary from fund to fund. While the size of the City’s current workforce is smaller than it was in the 2000s, the City’s overall personnel costs are significantly higher than they were ten years ago.

Over the past ten years, the City’s workforce has decreased from 40,264 budgeted Full Time Equivalents (FTEs) to 35,655 budgeted FTEs in 2017.

While the City’s current workforce is considerably smaller than it was in the 2000s, the 2017 budget increased the number of FTEs by 4.0 percent, primarily due to investments in public safety. In September 2016, the City announced that it was adding 970 sworn positions to the Chicago Police Department over two years. The 2017 budget included half of these hires: an additional 250 police officers, 100 detectives, 37 sergeants, 50 lieutenants, and 92 field training officers. Further, with the dissolution of the Independent Police Review Authority (IPRA) and the creation of the Civilian Office of Police Accountability (COPA), the City added 141 FTEs in the 2017 budget. This is 44 FTEs above the budgeted FTEs for IPRA in 2016. The City also added 25 positions to the newly created Public Safety Audit Section within the Office of the Inspector General to review and audit the City’s police policy and accountability functions.

While the City workforce has decreased by over 10.0 percent since 2007, personnel costs continue to grow. The City’s average annual cost per employee increased from $71,582 in 2007 to $99,068 and $99,730 in 2015 and 2016, respectively, due to growing salary and wages and other employee benefits, including pensions. The cost per employee grew by over 2.0 percent in 2015 due to the increase in the City’s contributions to the police and fire pension funds that year. While the City’s contributions to Police and Fire pension increased again in 2016, the City was able to keep the cost per employee similar to 2015 through certain healthcare plan changes. The average cost per employee will increase in 2017 due to new pension legislation that increases the City’s employer contribution to the Municipal and Laborers’ pension funds. See the pension section of this report for additional information.

Union Workforce

The increase in personnel expenses over the past decade is due primarily to salary increases resulting from contractual obligations under collective bargaining agreements with the unions that represent over 90.0 percent of City employees. As the overall number of City positions has decreased over the last decade, the relative proportion of union positions has increased.

The City has collective bargaining agreements with more than 40 different unions. The two bargaining units representing the largest number of City positions are the Fraternal Order of Police (FOP) and the Coalition of Union Public Employees (COUPE), which represents trades unions. The next largest group is the Chicago Firefighters Union (Local 2), followed by the American Federation of State, County, and Municipal Employees (AFSCME) representing positions that provide administrative support for City government and services. The fifth largest union is the Service Employees International Union (SEIU) currently representing public safety civilian positions, such as traffic control aides, detention aides, and police communication operators as well as custodial service employees.

The collective bargaining agreements with each of these unions include cost of living increases, resulting in higher personnel costs year-over-year. Additionally, these cost of living increases are often in addition to raises based on time in service that many employees receive. For trades unions, some positions receive a negotiated rate, while others are compensated pursuant to the prevailing rate.

The most recent collective bargaining agreement with the FOP provided an average annual salary increase of just over 2.0 percent between 2012 and 2017 and was ratified by the union in November 2014. The agreement with the Local 2 provided the same average annual salary increase between 2012 and 2017 was ratified by the union in June 2014. The most recent collective bargaining agreement with COUPE included a 16.0 percent increase between 2007 and 2012 followed by a 2.0 percent increase each year from 2013 to January 1, 2017. An agreement with AFSCME provided a 10.0 percent increase over five years and was ratified by the union in June 2014. The current SEIU agreement, which was finalized in August 2012, includes a 9.0 percent increase between 2011 and 2016. Agreements were reached with the unions representing police sergeants, lieutenants, and captains in late 2013 and early 2014, each providing a 2.0 percent salary increase per year between 2012 and 2014, and a 1.0 percent salary increase in 2015 and 2016.

At the beginning of 2016, five collective bargaining agreements expired, and the remaining 37 collective bargaining agreements expired at the end of June 2017, except Unit II – SEIU Local 73 / IBEW Local 21 whose contract was extended to December 31, 2017. The City has already begun the process of renegotiating these agreements.

Historically, non-union positions received salary increases equal to those negotiated for civilian union positions; however, between 2009 and 2015, non-represented positions did not receive any increases beyond normal step increases for time in service or one time salary increases requested by supervisors. In 2015, a 3.0 percent increase was provided to most non-union positions, and the 2016 budget included a 2.0 percent adjustment for most non-union employees earning less than $140,000 per year.

Healthcare Costs

A significant share of the City’s budget is spent on healthcare coverage annually, including medical, dental and vision care, for current City employees, a certain portion of City retirees, and spouses and dependents of both. Like many other large cities and private sector companies, the City self-funds its health plans, meaning that it pays for covered healthcare services rather than pay premiums to a third-party insurer. Due to the large number of covered individuals, it is cost-effective for the City to self-fund such expenses.

According to the 2016 Annual Survey by Kaiser Family Foundation and Health Research & Education Trust on Employer Health Benefits, the average annual health insurance premiums and worker contributions have increased by 58.0 percent over the past ten years. As healthcare costs continue to rise nationally, the City has been able to slow its annual healthcare cost growth through ongoing savings and reforms. As a result, the City’s healthcare costs have remained relatively stable since 2012.

In order to contain healthcare costs in the long-term and improve the overall health and well-being of its workforce, the City has instituted various reforms and programs.

In 2014, the City began a three-year phase-out of City funding for healthcare benefits for certain retirees. The final year of the phase-out of City-subsidized healthcare coverage for employees who retired on or after August 23, 1989 and their dependents was in 2016. Retirees who retired from the City prior to August 23, 1989, will continue in a City plan with support of up to 35.0 percent of the cost of the plan. For 2017 incurred claims, the City’s healthcare budget for retirees is approximately $9 million, which is a $90 million reduction from 2013 budget for retiree healthcare.

Additionally, the City works with organized labor through its Labor Management Cooperation Committee (LMCC) to identify and implement healthcare reforms. The initiatives identified through the work with the LMCC include promoting the use of generic drugs as substitutes for more expensive brand name medications, incentivizing providers to use standard diagnostic lab tests at a much lower cost, and reforms to help promote proactive healthcare management by employees and their dependents. Beginning in 2017, employees are able to participate in several healthcare pilots aimed at improving available healthcare options. These pilots were developed to improve healthcare outcomes for employees and their families from providing telemedicine options to encouraging second opinions on specific, non-emergency procedures.

Overtime Management

Overtime costs are driven by weather-related emergencies within infrastructure departments and enterprise departments and flexible workforce deployments, special events, and other management decisions within the public safety departments.

In recent years, public safety-related overtime costs have grown each year and have been the primary driver of overtime costs. Specifically, overtime costs within the Chicago Police Department have increased significantly in recent years. Overtime costs within the Chicago Police Department are primarily driven by extended tours of duty, court appearances, special events, and the department’s strategic violence reduction efforts, including organized crime enforcement missions, targeted violent offender raids and district patrol initiatives. Additionally, due to federal labor laws (Fair Labor Standards Act or FLSA), once a police officer works over 171 hours in a 28 day period the City is required to pay him or her at the overtime rate even if these hours are part of his or her regular scheduled shift.

As the City evaluates the cost of utilizing overtime to provide City services in relation to the cost of hiring additional employees, decisions regarding future overtime use will continue to be made based on the seasonality, type, and long-term consistency of the work that must be completed.

To view overtime data by employee since 2012, please visit the City’s data portal. Employee Overtime and Supplemental Earnings

Workers’ Compensation

The City’s workers’ compensation costs include medical expenses, payments for lost time for non-sworn employees, and the costs of case resolution associated with City employees who are injured while on duty. A number of factors contributed to growth in workers’ compensation costs over the past decade. Medical costs nationwide have risen significantly over the past decade, increasing the cost of treating injured employees. Further, salary and wages have grown over time as well, driving up the price of lost time that must be compensated by the City.

Over the past three years, the City has identified a number of opportunities to reform the policies and practices surrounding workers’ compensation to reduce these costs. The City has re-assessed its medical billing review process, worked to increase investigations to prevent fraud, implemented successful return-to-work programs for injured employees, and pursued more active case management. The reduction of $11.1 million in workers’ compensation expenses in 2016 is primarily due to the timing of necessary payments.