Mayor Emanuel’s Pension Plan Survives Rauner’s Veto
The mayor's police and fire pension reform plan is now law. So how does it affect city taxpayers?
Mayor Rahm Emanuel on Tuesday took a victory lap and thanked the General Assembly members who went against the governor. He says it spared the city from having to raise property taxes yet again, but does the fix just put off the mess for future taxpayers to pay?
Taxpayers will have to pay $220 million less than they would have if the governor’s veto had gone through. That means there will be no additional tax hike and a line of credit the city took out while waiting for this relief can be paid back.
Over the next four years, the total savings add up to just under a billion dollars. But after 2018, those payments will start to escalate again and ramp up until the fund reaches 90 percent by the year 2056. It’s prompted critics to say the measure does little more than defer the cost onto the future. But Emanuel says it does anything but.
“This is the exact opposite of kicking the can down the road, it’s actually confronting the challenges and doing the tough and necessary things to meet them,” he said. “It allowed Chicago to avoid raising property taxes an additional $300 million that was not necessary.”
But Gov. Bruce Rauner’s office calculates the additional cost over time to be $18.6 billion to taxpayers:
The governor’s veto on Friday clearly angered the mayor, who admitted that an override was iffy. He needed the support of two suburban Republicans – Reps. David Harris of Arlington Heights and David McSweeney of Barrington.
Outside budget experts are split between the mayor’s and governor’s position.
“There’s short-term benefit for the taxpayers; it gives Mayor Emanuel more flexibility,” said Laurence Msall of the business-friendly Civic Federation. “It’s understandable they’re trying to build budgetary relief.”
But the libertarian Illinois Policy Institute, close allies of Rauner’s agenda, says the city should’ve instead made more pension cuts.
“Until you start ending the crisis by moving new employees to a new pension plan, and offering existing employees optional plans, we’re going to have this problem over and over again,” said Illinois Policy Institute’s Ted Dabrowksi. “So it might be a short-term Band-Aid, but it is no solution, in fact, it makes things worse.”
The Civic Federation estimates $25 billion to be the collective amount due to all of the city’s pension funds, including the municipal and laborers fund.
The mayor last week announced a deal to stabilize the laborers fund by devoting to it an increase in the city’s 911 phone tax, while saving some money by offering retirees lower benefits if they retire earlier.
Separately, the Chicago teachers pension fund is also massively underfunded. Emanuel hopes to solve that crisis by having teachers pay their full 9 percent contribution as opposed to the current 2 percent, having the state pick up $200 million of those costs, and raising $175 million in city property taxes.
Legislation pending in Springfield would accomplish the latter two of those initiatives.
Follow Paris Schutz on Twitter: @paschutz
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