Mayor to order 90-day hiring freeze, job cuts in Oct. 23 unveiling of 2014 budget

Mayor Rahm Emanuel will order a 90-day hiring freeze on “non-critical” personnel when he takes the wraps off his 2014 budget on Oct. 23, City Hall sources said Wednesday.

To save $1 million, the hiring freeze will begin Jan. 1 and continue throughout the year as jobs become open. It will not impact police officers, firefighters or other public safety employees. As many as 20 already vacant jobs will also be eliminated to save $500,000.

After a three-year hiring slowdown, the police academy is churning out regular classes of recruits to keep pace with retirements. Emanuel has pledged to continue hiring at that same clip to keep the Chicago Police Department at full-strength—even as aldermen demand additional officers.

The $1.5 million expected to be generated by the hiring freeze and job cuts are just a trickle compared to the $338.7 million shortfall in next year’s budget that Emanuel is struggling to close—and the $1 billion gap Chicago faces next year without pension reform.

In mid-July, Moody’s Investors ordered an unprecedented triple-drop in the city’s bond rating, citing Chicago’s “very large and growing” pension liabilities, “significant” debt service payments, “unrelenting public safety demands” and historic reluctance to raise local taxes that has continued under Emanuel.

Standard & Poor’s has cited those same factors for its negative outlook on Chicago’s A-plus rating.

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At an unrelated news conference Wednesday, Emanuel refused to discuss what taxes or fees he intends to raise to erase the $338.7 million shortfall.

He would only talk about the cuts.

“I’m going to be putting in place a hiring freeze and further elimination of non-essential employees. In the first two years, that added up to about 1,500 positions. And we’re going to continue to do that. We will constantly ask every department, `Is there a better way to do it? Is it essential? Is that core to your mission?’,” the mayor said.

“What I have done in the past two budgets should give you guidance going forward about how we’re going to continue to reform, find efficiencies and invest in the core things that make the city strong: First and foremost, our children. I did it last year with the 30 percent increase in after-school programs and adding 5,000 children to pre-K. Second, small business. And third, our neighborhood services.”

Budget Director Alex Holt has taken sales and property taxes off the table to close the 2014 gap. But she has refused to rule out other tax and fee hikes after yet another round of cost-cutting that might include layoffs.

Although the city payroll has declined by 20 percent since 2003 – to 32,420 employees – personnel costs have increased by 15 percent. The average annual cost per employee, including benefits, went from $58,299 to $95,406 driven largely by rising health-care costs.

No matter what Emanuel does to close the 2014 gap, it will pale by comparison to the financial storm that lies ahead.

In 2015, the city is required by state law to make a $600 million contribution to stabilize police and fire pension funds that now have assets to cover just 30.5 and 25 percent of their respective liabilities.

That would cause the deficit to balloon to $994.7 million in 2015 and $1.15 billion in 2016 without a painful mix of employee concessions and new revenues, according to the city’s own annual financial analysis.

Emanuel wants the Illinois General Assembly to impose annual property tax increases on Chicago homeowners and businesses, but put off the balloon payment to shore up police and fire pensions until 2023.

A seven-year “ramp up” was built into a tentative contract with police sergeants but roundly rejected by the rank and file. The Fraternal Order of Police and the Civic Federation are dead-set against postponing the day of reckoning. They say that’s precisely what got the city and state into this pension mess.

Civic Federation President Laurence Msall has argued that the 2014 gap is “manageable” with “very difficult reductions in personnel” and cuts that include the $66 million-a-year aldermanic menu program and a refuse collection rebate for condominium owners that Emanuel agreed to phase out instead of eliminate.

Msall has predicted that Emanuel will have to “tap into additional service fees,” in part, because Chicago is “operating precariously with very little in reserve for weather-related and other emergencies.”

But he has also said, “The following year, the city faces a financial cliff. Police and fire pensions are so close to running out of money, there’s not enough time to both save those funds and relieve Chicago taxpayers without dramatic reductions” in employee benefits.

Normally, City Hall exaggerates the size of the budget shortfall whenever it’s negotiating new contracts with police officers, firefighters and other unionized city employees to strengthen its hand at the bargaining table.

For the second straight year, Emanuel has flipped the political script.

His preliminary 2014 budget forecasted a $338.7 million hole – 27 percent less than the $460 million gap predicted by the mayor’s own budget team a year ago.

Rebounding sales, income and real estate transaction tax revenues and savings generated by managed competition, a wellness program, aggressive debt collection and the switch from a ward-by-ward to a grid system for collecting garbage all contributed to the improving financial picture.

The shortfall assumes that the city will continue to hire only enough police officers to keep pace with a wave of retirements that, Holt contends, has eased somewhat.

It also assumes that police overtime spending that was $10.5 million in the hole before the traditional summer crime wave will continue to keep the lid on homicides and shootings.