Chicago had better start budgeting like the game is up.
On Friday, a Cook County judge rejected Mayor Rahm Emanuel’s plan to restructure two of the city’s underfunded pension systems. If the Illinois Supreme Court does not reverse the lower court — and that’s looking like a pipe dream — the city will be on the hook for billions of dollars more just to adequately fund the Municipal Employees and Laborers pension funds.
On top of that, Friday’s ruling makes it extremely likely the city will remain on the hook for billions of dollars to adequately fund its police, firefighter and teacher pension systems.
New revenue must be found now, mostly through an array of loathsome tax increases, and cuts in city services are inevitable. That pension debt keeps growing. There can be no more waiting on the courts to give their seal of approval to pension reform schemes that border on wishful thinking.
But even if Chicago takes the most painful measures, a day may come when the city simply cannot pay full benefits to a retired worker. One would hope that the specter of this alone might compel the unions to agree to reasonable pension cuts — to better protect what they’ve got. But that, too, might be a pipe dream.
When Judge Rita Novak shot down the city’s pension reform plan, a union spokesman called it “a win for all city residents.”
It was, in fact, a disaster.
City Hall says it will appeal Novak’s decision, as it should, if only to gain greater clarity from the Supreme Court as to what in the way of pension reform, if anything, might pass constitutional muster. But Novak’s ruling was emphatic. There is “simply no way,” she wrote, that the city’s promise to pay more into the two funds and to “preserve and protect” them allowed the city to do an end-run around a clause in the 1970 state Constitution that benefits “not be diminished or impaired.”
How does Chicago move forward like a properly chastised loser?
To begin with, City Hall should honor a commitment to pay an additional $250 million over five years into the Municipal Employees and Laborers pension funds, though Novak’s ruling actually frees the city from that promise. It would be a show of faith and a step in the right direction — the direction of paying up.
Next, the city should premise every future budget decision on the working assumption that relief from the courts or the state Legislature will not be forthcoming. It is the only prudent approach.
Emanuel has said he will present his proposed 2016 budget a month earlier this year, in September, to allow more time for analysis and debate, and he has urged aldermen to come up with creative ways to raise revenue and cut costs. He has also, tellingly, stopped giving the cold shoulder to revenue-generating schemes he dismissed during the last mayoral election. He has even embraced one of the more popular ideas of his critics, reducing the number of tax increment finance districts.
But after Friday’s court ruling, raising property taxes can’t even be debatable. The only question is how much, and what might be some partial alternatives.
Ald. Joe Moore (49th) has proposed a graduated city income tax. Ald. Ameya Pawar has proposed a corporate income tax. Other ideas being tossed around include a gas tax, a smokeless tobacco tax, a $1-a-ride surcharge on cab and ride hailing services, and the legalization and taxation of marijuana.
The waiting game is over. At every level of government — city, county and state — elected officials for years have pushed pension reform schemes that, they hope, will pass constitutional muster by giving unionized workers something sufficiently tangible in return, what in legal shorthand is called “consideration.” But the Supreme Court two months ago rejected a state pension reform plan, and the city’s plan is likely to meet the same fate.
If somebody can find this holy grail of “consideration,” terrific. But it could be years.
In the meantime, it is time to pay down some big bills.
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