Rauner hints at vetoing Emanuel’s latest pension funding plan

The once close friendship between Mayor Rahm Emanuel and Gov. Bruce Rauner has already been strained to the breaking point by the marathon state budget stalemate.

Now, there’s a new chapter in the war of words — and it just might impact the mayor’s plan to save Chicago’s largest and smallest city employee pension funds.

Although the City Council easily approved the mayor’s plan to slap a 29.5 percent tax on water and sewer bills to save the Municipal Employees pension fund, the Illinois General Assembly still needs to sign off on employee concessions tied to the deal as well as the funding schedule.

Same goes for the mayor’s plan to save the Laborers pension fund, bankrolled by a previously-approved, 56 percent tax on monthly telephone bills.

Now, Rauner is hinting strongly that he may veto both of those plans, for the same reasons he vetoed a bill giving the city 15 more years to ramp up to a 90 percent funding level for police and fire pensions.

“My concern with the proposal so far, is they’re largely based upon re-ramping the payment schedule and slowing down the payment schedule and back-loading it,” Rauner was quoted as saying in a story posted by Northern Public Radio.

“That’s what we’ve done in Chicago for decades, and it’s the reason Chicago has the worst credit rating of any city other than Detroit.”

The mayor’s office branded Rauner’s comments “puzzling.”

In an emailed statement, Molly Poppe, a spokesperson for the city’s Office of Budget and Management, said the governor fails to recognize that Chicago is moving “from a woefully insufficient contribution level set by state law that ensures bankruptcy in the next ten years to a responsible payment plan with a ramp” to an “actuarially required contribution” that “ensures actuarial funding in perpetuity.”

Pressed on whether Rauner was, in fact, threatening a veto, his spokesperson Catherine Kelly would only say that the “dialogue” continues about “enacting comprehensive pension reform for both the city and state.”

Earlier this year, three Republican crossover votes in the Illinois House helped Emanuel override the governor’s veto of the police and fire pension reforms, staving off yet another massive property tax increase.

It was a stunning victory that Emanuel had burned the phone lines to achieve. Just days before, top mayoral aides had described the chances of an override in the House at 50-50 at best.

Emanuel and Rauner are longtime friends, education reform allies and former business associates who made millions together. Their families have vacationed together.

Their relationship has been strained to the breaking point by the state budget stalemate and by Rauner’s threat to engineer a Republican takeover of the Chicago Public Schools and pave the way for the Emanuel-controlled system to declare bankruptcy.

The governor’s new pension veto threat just might explain why Emanuel is now declaring his old friend virtually unelectable.

“He doesn’t have a record. He’s been governor now . . . [for] two years. There’s not a single major legislative accomplishment. In his tenure, kids have been kicked out of day care. People have not applied to our universities because of the uncertainty created in state government. When he came into office, we had basically $3 billion in unpaid bills. It’s now at $10 billion and growing,” the mayor said during a taping of the WLS-AM Radio program, “Connected to Chicago,” to be broadcast at 7 p.m. Sunday.

“To run for re-election, you’ve got to tell people what you’ve done. What I just said to you is what’s happened under his watch. And if he doesn’t reverse those, that’s his legacy.”

Emanuel argued that the governor’s strategy of blaming Illinois House Speaker Michael Madigan (D-Chicago) won’t cut it.

“As the mayor, I usually know who gets blamed in the city of Chicago. As governor, you’re the chief executive. And there’s a word associated with it: `chief.’ You’re the chief. You’re responsible for setting the tone” and getting things done, the mayor said.

As if the new round of verbal sparring isn’t enough, a new report comparing the city and state pension crises by Nuveen Asset Management is adding a little fuel to the fire.

The report credits Chicago with making substantial progress by identifying reliable funding sources to save all four of its city employee pension funds. That’s even though the steps Emanuel and the City Council have taken “do not fully solve the city’s pension funding gap” and $300 million more will be required in 2022.

“Recent actions are positive, but future pension funding cliffs are not insignificant and will require the city to maintain long-term fiscal discipline,” the report states.

The state is going in the opposite direction, the report states.

“Unlike the state, the city of Chicago is taking steps to address its challenges head-on . . . While the state’s credit rating is susceptible to rating downgrades, we think Chicago’s identified pension funding proposals should forestall further downward rating pressure,” the report states.

“Illinois’ unprecedented budget impasse is ultimately political and the path to compromise is still unclear . . . By operating without a budget for so long, state leaders have created a structural budget gap too severe to address without significant new revenues or drastic cuts.”

Even if the political stalemate breaks and state pension reforms are approved, the legislation may not be reduce enough of the $111 billion in unfunded pension liabilities, Nuveen warned.

“Illinois will continue to have elevated pension costs indefinitely,” the report states.

“The unprecedented political conflict has negatively impacted the state’s ability to function normally, but debt impairment remains unlikely.”