Mayor Rahm Emanuel has been hammering Jesus “Chuy” Garcia for promising the moon and failing to explain how he’d pay for it, no less solve Chicago’s $20 billion pension crisis and close a $300 million operating shortfall.
On Friday, Garcia will answer his critics. The only question is, will he be specific enough and politically realistic enough to convince Chicago voters that he’s capable of leading a city on the financial brink?
“The mayor’s people won’t be satisfied. But a lot of people will like it,” said a source close to Garcia, who asked to remain anonymous.
ANALYSIS
“It’s not how we solve every one of the city’s financial problems. I don’t think anybody’s gonna say, `Here’s how we fill a $1 billion hole.’ But, it’s a change in approach. Reforms to make the situation better. And he’s prepared to talk about revenue.”
Sources said Garcia will steer clear of advocating a post-election property tax increase, as forecast this week by one of Emanuel’s most powerful City Council allies.
Instead, the Garcia confidante pointed to what the challenger said on the day he questioned the sincerity of Emanuel’s opposition to the devastating state budget cuts proposed by the mayor’s longtime friend Gov. Bruce Rauner, and demanded that every one of the cuts be reversed and replaced with new revenue.
On that day, Garcia talked about everything from a graduated income tax and making permanent the recently expired state income tax hike to an idea championed by both Rauner and Emanuel: broadening the sales tax umbrella to an array of services not now covered.
The so-called “millionaire” tax proposed by Illinois House Speaker Michael Madigan (D-Chicago) and a financial transaction tax on La Salle Street exchanges should also be on the table, Garcia said then.
That’s a tax now prohibited by state and federal law; Emanuel adamantly opposes such a tax, fearing it might push the exchanges to leave Chicago, turning the financial district into a ghost town.
The Emanuel campaign has put a $120 million price tag on Garcia’s pledge to honor the mayor’s broken promise to hire 1,000 additional police officers.
On Friday, Garcia is expected to reaffirm his commitment to bankroll that promise by reining in police overtime expenses that Emanuel’s budget assumes will be reduced to $70 million this year.
But emptying the overtime account is not realistic. The city needs a contingency fund to pay for at least some police overtime in the event of emergencies. And emptying the overtime account would still leave a $50 million gap in what it would cost to pay salary and benefits for those new officers.
Sources said Garcia’s plan would also rely heavily on reining in both borrowing and tax-increment-financing districts that deprive the city, Chicago Public Schools and other local taxing bodies of $1.7 billion in annual revenue.
That’s a slippery slope for Garcia, since much of that money is already earmarked for specific projects that Chicago aldermen hold dear and would fight tooth-and-nail to keep.
Yet another campaign adviser said Garcia would declare his willingness to negotiate pension reforms in response to yet another pension-related drop in Chicago’s bond rating — to two levels above junk status.
“He has never said to his advisers that he would never cut benefits or increase contributions. . . . That might have to happen,” the Garcia confidante said.
The source said Garcia would also talk about saving money on fees tied to pension fund management by “moving a lot of assets that can be moved into index funds.”
Emanuel negotiated a deal to save two of four city employee pension funds that would raise employee contributions by 29 percent and reduce cost-of-living benefits.
That agreement is now facing its own legal challenge while awaiting the outcome of the state Supreme Court ruling in the state pension case.
The mayor initially proposed raising property taxes by $250 million over five years to bankroll the city’s increased contribution to the Municipal Employees and Laborers pension funds.
He agreed to substitute a 56 percent increase in Chicago’s telephone tax for the city’s first-year contribution, only after then-Gov. Pat Quinn balked at a pre-election property tax hike.
The mayor has refused to say how he plans to meet the city’s increased obligations to the two funds after the first year.
He has also put off until December a decision on how Chicago will meet a state-mandated, $550 million payment to shore up police and fire pension funds.
The decision to put off Chicago’s financial day of reckoning has left Emanuel as open to criticism as Garcia.
Even if Garcia can somehow solve the city’s financial crisis, there’s another time bomb that needs to be diffused at the Chicago Public Schools.
Emanuel’s hand-picked school board balanced its pre-election budget by counting on 14 months of property tax revenue in just 12 months.
The accounting sleight-of-hand leaves just 10 months of property tax revenue to balance this year’s budget, when the shortfall balloons to $1.14 billion, thanks to a state-mandated, $700 million payment to the teachers pension fund.
Emanuel has offered no solution to the school budget crisis. He has only appealed to Rauner to end the pension double-standard that forces Chicago taxpayers to pay twice — for retired city teachers and for the pensions of retired teachers outside the city.
Against that backdrop and the $9.5 billion teacher pension crisis, negotiations will soon commence in earnest on a new teachers contract.
Chicago Teachers Union President Karen Lewis, who dropped out of the mayor’s race and threw her support to Garcia after being diagnosed with brain cancer, has promised to lead her members out on strike for the second time in three years if teachers don’t get a fair contract.
Garcia has gone so far as to predict another teachers strike if Emanuel is re-elected.
On Friday, Garcia will try to convince Chicago voters that as mayor, he would have the political backbone to stand up to the teachers union and negotiate a contract and pension reforms that place taxpayers’ interests ahead of the union’s interests.
Laurence J. Msall, president of the Civic Federation, said his organization is hopeful the mayoral candidates “would clearly articulate an immediate plan ‑ including the sources of revenue” — to save the city pension plans, reduce and manage the city’s “extraordinary debt level and its related credit rating deterioration” and address Chicago Public Schools’ looming $1 billion deficit.
“Resolving these issues is going to have a very significant impact on each and every resident and taxpayer in Chicago,” Msall said. “Failure to effectively address any one of these issues will threaten the future financial viability of the City.”
Earlier this month, U.S. Sen. Mark Kirk, R-Ill., warned that Chicago could follow Detroit into bankruptcy if Emanuel is not re-elected. Kirk has argued that Garcia lacks the “gravitas with the bond market” to secure Chicago’s mountain of debt.
There’s nothing Garcia can say or do Friday to prove Kirk wrong. But he needs to do just enough to show that he has the heft, ideas and political fortitude to steer Chicago through troubled waters.
