A top mayoral aide on Tuesday pegged the cost of retroactive pay raises for rank-and-file Chicago Police officers at up to $65 million, but ruled out long-term borrowing to pay for it.
If borrowing is needed at all to cover the cost of back pay or any of the 11 percent pay raise over five years, Budget Director Alex Holt said it would be “short-term only” paid back over the life of the contract, which expires on June 30, 2017.
Former Mayor Richard M. Daley borrowed to the hilt, sold off revenue-generating assets and spent most of the money to hold the line on taxes in his last two budgets before retiring from politics.
The city even borrowed $254 million to cover back pay raises long anticipated for police officers and firefighters.
But Holt said Emanuel has called a halt to such risky financial maneuvers.
That’s even though he’s using an “accounting gimmick” in the school budget to put off the financial day of reckoning until after the election and doing the same at City Hall by assuming that the Illinois General Assembly will solve Chicago’s police and fire pension crisis.
“The mayor has been pretty clear that he wants to make a break from the past and not borrow 30-year money for short-term payments,” Holt said Tuesday.
“We haven’t borrowed for contracts settled under his watch. We’ve paid for it with current cash. These are short-term operating expenses for four or five years. He doesn’t want to be borrowing money for 30 years.…That’s part of his approach to financial management.”
Earlier this year, Emanuel convinced the City Council to double— to $1 billion — a “commercial paper” program used to tide the city over between bond issues.
Chief Financial Officer Lois Scott said then that the short-term borrowing program would “ensure the city has liquidity for unseen needs such as retroactive salary payments and judgments.”
On Tuesday, Holt held out the possibility of tapping that commercial paper program to pay for police pay raises.
“It’ll be some mix of current cash and, if there is any borrowing, it will short-term borrowing only paid for over the life of the contract, which expires in 2017,” she said.
“If you look at AFSCME and fire and the other contracts, we’re paying for it under current cash. The amount you’re talking about here is quite significant. To the extent possible — without impacting services people rely on–that’s what we do. To the extent we can’t, there would be some mix. We need to balance the need to pay retro [and] maintain sevices. We’ll see. We have to see what the final numbers are, but [the mayor’s] orders are quite clear.”
Last week, the Chicago Sun-Times disclosed that Chicago Police officers would get the retro pay raise Emanuel once threatened to deny them after a paperwork mistake made by their now ousted union president.
The following day, the deal was announced. The retroactive pay raise of 2 percent, effective on both July 1, 2012 and Jan. 1, 2013, will not apply to overtime earned during the first year of the contract.