Brown: Day of reckoning arrives for city pension problem

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There is no easy way out, nowhere to run and hide from the $10 billion in unfunded public pension obligations bearing down on the city of Chicago and its taxpayers.

The city must start coming up with the money to meet its promises, and doing so will require higher taxes starting yesterday.

That’s been true for a long time, but it was never more apparent than on Friday after a Cook County judge struck down as unconstitutional Mayor Rahm Emanuel’s plan for restoring two city pensions funds to financial health.

Emanuel’s plan relies in part on reducing the benefits promised to city workers. Associate Judge Rita Novak determined the city can’t do that. Her written opinion echoed an Illinois Supreme Court ruling in May about a similar plan to trim state worker pensions.

The Emanuel administration immediately said it would appeal, arguing as it has all along that its approach is different than the state pension law tossed out by the high court.

The city’s reasoning is that its plan gives workers something they don’t have now — a legal commitment from the city to come up with money to fund the pensions.

Most everybody else considers that appeal somewhere between a long shot and a waste of time. Novak specifically rejected the city’s theory, saying the city already is obligated. But courts can be unpredictable, and we won’t know for sure until there’s a final ruling months from now.

OPINION

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If the mayor is committed to rescuing the pension funds, he can’t wait that long for the city to begin taking remedial steps to restore them to financial health. Putting off the pain won’t lessen it.

I’ve always thought the mayor’s idea for a pension solution requiring joint sacrifice — trimming retiree benefits, increasing employee contributions and asking more from taxpayers —made practical and political sense. I don’t believe it’s feasible to expect taxpayers to make up the entire amount that the pension funds were allowed to fall behind without damaging the city’s economy.

Unfortunately, though, the mayor’s plan didn’t pass legal muster.

By reducing the annual three percent cost of living increases promised to retirees, the city pension legislation violates the Illinois Constitution’s pension protection clause, Novak ruled.

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Anders Lindall, a spokesman for the American Federation of State County and Municipal Employees Council 31, one of the unions that joined in the lawsuit to block the law, argued Novak’s ruling was a “win for all city residents.”

I’m not even sure it’s a win for all the affected employees and retirees who still have to worry about how the city will come up with the money it owes them.

Most of them still live in the city and will have to pay the higher taxes that are coming. The ones who came to court Friday said they accept that.

So where do we go from here?

The folks at AFSCME say the solution is for the city to raise revenues by closing corporate tax loopholes, closing tax increment finance districts and “asking rich folks to pay their fair share.”

Over at the City Council, members of the Progressive Caucus also endorsed idea of Illinois switching to a graduated income tax with higher rates for wealthier individuals.

That’s could work, except there are a lot of other hands reaching for that money, and it doesn’t answer the question of what the city will do for itself.

I’ve been saying for a long time there will have to be a property tax increase, but the mayor keeps finding a way to avoid it for another year.

The city sent signals in advance of Novak’s ruling that losing the case could actually benefit city finances in the short term by lifting the legal obligation under the pension bill to make increased payments.

That would be extremely shortsighted.

City Corporation Counsel Stephen Patton clarified Friday afternoon that the city will seek to leave the pension law in place—including its obligation to come up with an additional $89 million for the two pension funds—while its appeal is pending.

Every day the city waits, the pension hole gets $2.8 million deeper, which is why filling it has to start now.

Follow Mark Brown on Twitter: @MarkBrownCST

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