More bad news for Emanuel: Judge refuses to stay pension ruling

SHARE More bad news for Emanuel: Judge refuses to stay pension ruling

Mayor Rahm Emanuel got more bad news about the city’s $30 billion pension crisis on Wednesday, just as he was intensifying his efforts to get aldermen on board the train to raise revenues and cut costs.

The same Cook County judge who overturned Emanuel’s plan to save the Municipal Employees and Laborers pension funds refused the mayor’s request for a stay pending appeal to keep the higher contributions and benefit cuts in place.

Unless the Illinois Supreme Court agrees to grant the stay — which is highly unlikely, considering the definitive language the high court used in overturning state pension reforms — retirees who have been denied their 3 percent cost-of-living increase since Jan. 1 will have to be reimbursed retroactively.

And the 29 percent increase in pension contributions for active city employees will no longer be in effect. It’s not clear whether active employees would be entitled to a refund for the increases they have paid since Jan. 1.

Judge Rita Novak “refused to stay her order because she thinks the city stands very little chance of succeeding on appeal,” said Clint Krislov, an attorney representing active and retired city employees.

“That means that automatic annual increases they haven’t been paid since the beginning of the year should start to appear, maybe not in the August benefit payments but possibly in the September payments.”

Corporation Counsel Stephen Patton could not be reached for comment about Novak’s handwritten ruling.

The deal that Emanuel painstakingly negotiated with scores of union leaders raised employee contributions by 29 percent — from 8.5 percent currently to 11 percent by 2019 — and ended compounded cost-of-living adjustments for retirees ineligible for Social Security. Those adjustments have been a driving force behind the city’s pension crisis.

The city started collecting the higher payments Jan. 1.

Patton and Emanuel are holding out hope that the Supreme Court will find that the Chicago reforms negotiated with 28 impacted unions are “fundamentally different” from the state reforms imposed “arbitrarily.”

They have further argued that the city’s commitment to “preserve and protect” the two funds amounted to a “massive net benefit.” Novak shot down both arguments.

“In the state’s case, all it did was take rights away. . . . In our case, it’s indisputable that participants are better off with this legislation than they would be without it. Instead of impairing and diminishing pension benefits, it saves these funds from insolvency and ensures that pensions that have been promised will be paid,” Patton said last week.

Patton noted that, if the city wins its appeal, Chicago’s annual contribution to the two funds will quadruple over five years — to $650 million. If the city loses, the city’s contribution will revert to what it was last year: $177 million, he said.

“If this legislation gets overturned, we’re back to the old law and things continue as they were. These funds go insolvent in 10 and 14 years respectively. They’ll run out of money, and pensions will not be paid,” he said.

The latest round of bad news about the pension crisis comes as the Emanuel administration intensifies its efforts to enlist aldermen in the search for new revenue and bureaucratic belt-tightening.

In a letter to aldermen Wednesday, Budget Director Alex Holt said she would hold two-hour “working sessions” with aldermen on Aug. 11, 12 and 13 to solicit ideas on ways to cut costs and reform the way the city does business. The last half of each working session will be spent “discussing your ideas for additional revenue,” Holt wrote.

“Now, more than ever, we need to work together to keep the city on the path to financial stability,” Holt wrote, without mentioning the junk bond status triggered by the pension crisis.

“This year’s budget will be extremely challenging . . . and it will require some difficult choices — both in terms of reforms and revenue. But through consistent and constructive collaboration, we can establish a comprehensive budget that makes responsible choices while continuing to make essential investments in neighborhood, infrastructure and public safety.”

Emanuel has moved his 2016 budget unveiling up a month to September and urged aldermen to come forward with their cost-cutting and revenue-raising ideas.

Aldermen have obliged, by suggesting everything from a city income tax, a gas tax and authorizing video poker in Chicago to a corporate income tax, a 30 percent tax on smokeless tobacco, a garbage collection fee and a $1-a-ride surcharge on rides provided by taxicabs and ride-hailing companies.

A few aldermen have even gone so far as to entertain the controversial idea of legalizing and taxing the recreational use of marijuana. Ald. George Cardenas (12th) has also added the idea of a penny-an-ounce tax on sugary drinks to the mix.

On Wednesday, Emanuel once again refused to take a stand on any of those ideas amid concern that passing judgment would stifle the debate. He wants aldermen to keep the ideas coming.

“The good news is, you have people now bringing forward ideas on revenue. You have people bringing forward ideas on savings. And I want that process and that open conversation to continue,” the mayor said.

“One of the things I’m trying to do is provide space for the aldermen to give ideas. If I sit there and start putting my thumb on the scale, that will prejudice” the debate.

Aldermen aren’t the only ones whose ideas are being solicited.

On Wednesday, Holt met with Inspector General Joe Ferguson to find out whether the audits he churns out on an almost monthly basis outlining ways the city is leaking revenue could be turned into specific savings.

The City Council did that Wednesday by eliminating a $3.3 million garbage freebie for more than 1,800 multi-unit residential buildings.

“I always start from a premise that, before you go ask taxpayers or anybody else to pay anything more, is the system operating at a most efficient basis? Are we leaving any money behind? And could we, through better management, do the right thing?” the mayor said.

“Before taxpayers are asked for a penny, [we need to make certain] the bureaucracy has been shaken up to . . . let loose dollars that are locked in an inefficient bureaucracy.”

The mayor made no mention of the $1.2 billion in “budget options” — including new revenues — that Ferguson presented to Emanuel shortly after the mayor took office in 2011.

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