OK, now what?Mayor Rahm Emanuel and the city pension crisis landed back at square one Thursday, the main difference being that square one is now located in a deeper hole than when Emanuel took over as mayor five years ago.
Emanuel is not really to blame for this any more than the city workers and retirees who are owed the money or the Illinois Supreme Court that explained again Thursday that the city is obligated under the state Constitution to make good on its past pension promises, no matter how unrealistic.
But as the guy who volunteered to captain the ship, Emanuel is still the one most responsible for keeping it from crashing on the rocks.
Emanuel, who surely knew this day was coming as the court’s ruling was no surprise, must have developed a Plan B by now. Or are we already on Plan C? I’ve lost track.
Surprise or not, it was certainly a disappointment to the mayor and others who hoped for a legislative solution that would reduce the pain to city taxpayers by spreading it to city workers and retirees.
The justices left the door ajar slightly to finding another route to the same result, allowing that pension fund members — either individually or through union bargaining — could voluntarily agree to give up some of their benefits in exchange for other “consideration.” The mayor indicated he will go back to the unions to try again.
I’m unconvinced that any such bargain can be struck that would reduce the city’s unfunded liability in any meaningful way.
As I understand how this might work, city employees would be asked whether they would rather have what’s behind door one or behind door two, understanding that what’s behind door two is worth less over the long haul. There’s always a percentage of people who are willing to make unwise financial choices to put more money in their pocket today.
More drastic measures will be needed to avoid the coming insolvency.
More tax increases, service cuts and bankruptcy probably need to be part of the discussion, along with maybe a constitutional amendment to keep Illinois from finding itself in this position again should it ever find its way out of the current mess. A constitutional amendment can’t undo the current liabilities.
Ed Bachrach is a Chicago resident who used to own a chain of clothing stores and now devotes his time to making the case for the city of Chicago filing for bankruptcy.
Bachrach argues it is the only responsible way for the city to restructure its debts and move forward, all other proposals falling short of actually fixing the problem.
Under Bachrach’s concept of a “comprehensive settlement,” Chicago taxpayers would still face hefty tax increases, but city workers and retirees would also take a hit. In addition, other city creditors such as banks and bondholders would lose out.
Bankruptcy is an absolute last resort to me, and I’ve told Bachrach I’m not ready to support the idea. But I can’t tell you it’s not coming.
The Supreme Court made clear Thursday that one of the mayor’s fallback positions is not going to work.
Lawyers for the administration had contended that if the Municipal Employees and Laborers pension funds are allowed to continue on their present trajectory and run out of money in another decade or so, it won’t be the city’s responsibility to make good on the liabilities because the pension funds are separate legal entities.
The Supreme Court clarified that even if the pension funds become insolvent, and arguably they already are, it’s the city that is ultimately obligated to come up with the money to pay the benefits owed to its retirees.
The court doesn’t say how the city should pay these benefits, only that it is responsible for doing so.
And that leads us back to where we started.