Emanuel moves up budget unveiling to September to confront pension crisis

SHARE Emanuel moves up budget unveiling to September to confront pension crisis
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Mayor Rahm Emanuel says he will introduce his 2016 budget a month early. | File Photo

Mayor Rahm Emanuel said Wednesday he will introduce his2016 budget in September — a full month early — to confront Chicago’s “momentous budget and pension challenges.”

Chicago’s faces a $1 billion operating shortfall and a $20 billion pension crisis. The Chicago Public Schools has a $1 billion shortfall and a $9.5 billion unfunded pension liability that threatens the on-time opening of Chicago Public Schools.

An Illinois Supreme Court ruling that overturned state pension reforms and placed Emanuel’s plan to save two of four city employee pension funds in similar jeopardy dropped Chicago’s bond rating to junk status.

DEBT SERVICE: Council to authorize another $1.1 billion in borrowing

On Wednesday, Budget Director Alex Holt wrote a letter to aldermen informing them of the accelerated timetable and soliciting their cost-cutting and revenue-raising ideas. The new schedule calls for final City Council approval of the budget in late October.

“As you know, the city is facing momentous budget and pension challenges…We are accelerating the 2016 budget, which will allow us to quickly tackle these challenges,” Holt wrote.

“In September, Mayor Emanuel will introduce his 2016 budget, which will include both the annual operating plan and the resources to fund the city’s pension obligations….. However, we are seeking your input now so that we may leverage your experience and ideas.”

Revenue-raising and cost cutting ideas have already started pouring in. They range from a city income tax, a gas tax and authorizing video poker in Chicago to a suburban-style garbage collection fee and legalizing and taxing the recreational use of marijuana.

At Wednesday’s City Council meeting, two mayoral allies also proposed a ground-breaking, $3.3 million change that would repeal the so-called “grandfather clause” that has allowed more than 1,800 multi-unit residential buildings to continue to get free city garbage pick-ups that were phased out for most other multi-unit buildings in 2000.

Emanuel also held a closed-door meeting with labor leaders to solicit their ideas.

In her letter to aldermen Wednesday, Holt warned aldermen that the 2016 budget “must be presented in a comprehensive and responsible manner that involves both revenue and reform.”

“The mayor has respectfully requested that you consider this when you submit your cuts, efficiencies, cost-savings and revenue ideas so that they can be considered as we work with you to develop the budget,” Holt wrote.

“With the many tough choices we face on both the budget and the pensions, it is critical that all of us who work on this issue — aldermen, community leaders, labor and others — think anew about ways to deliver the services our taxpayers and residents depend on and deserve at a lower cost.”

Holt said there is “no question that difficult choices will be necessary” to “right the financial ship.” She acknowledged that aldermen “find ourselves in the unenviable position” of having to reverse a “legacy of financial decisions that weren’t always best for the city’s long-term financial interests.”

“These will not be easy challenges to solve. However, during the past four years, we have shown that we can make progress by methodically changing the financial practices of the past,” she wrote.

The decision to move up the budget process to the earliest mayoral introduction in recent memory follows through on a promise made earlier this week by Chief Financial Officer Carole Brown.

When Ald. John Arena (45th) criticized the mayor’s $1.1 billion borrowing because it did not address Chicago’s desperate need for new revenue, Brown promised that the mayor was prepared to do just that.

The CFO acknowledged that new revenue “has to be part of a larger discussion around — not just this year’s budget, but budgets going forward” and said that’s a debate Emanuel is “committed” to having in plenty of time for aldermen to weigh the difficult choices.

“I understand the frustration. But what the administration has to bring to this body is a responsible plan that addresses all of the upcoming obligations of the city. That’s what the mayor is committed to doing,” she said.

Last month, the Democratic-controlled Illinois General Assembly lifted the financial hammer hanging over Chicago taxpayers: a state-mandated, $550 million payment due in December to shore up police and fire pension funds.

Lawmakers approved a bill that would give the city fifteen more years to ramp up to 90 percent funding levels for the two funds.

Chicago taxpayers would still be on the hook for $619 million in payments to the two funds next year—more than double the current payment. But that’s still $219 million less than the city would have been forced to pay and an $843 million break over the next five years.

The pension reform bill is now caught up in the state budget stalemate over Rauner’s demand for pro-business, anti-union reforms that seems to be intensifying by the day.

So is Emanuel’s request for an elusive, city-owned Chicago casino with all of the revenues devoted exclusively to police and fire pension.

The General Assembly hasn’t even entertained the issue of teacher pension reform and Emanuel’s demand that the state end, what he calls the “dual taxation” that forces Chicago taxpayers to pay twice—for the pensions of city teachers and for teachers outside the city.

The longer the budget stalemate drags on, the longer Emanuel will have to wait for help for his needy city. And the longer Chicago will be saddled with the junk bond status that has already cost taxpayers tens of millions in penalties and higher interest rates.

At some point, the mayor might even be forced to go it alone without Springfield and push for a local solution to the city’s financial problems.

By September, he hopes to know one way or another. He might also know whether his reforms to the Municipal Employees and Laborers Pension funds will survive a court challenge. Even in the unlikely event that it does, Emanuel still needs to come up with an additional $50 million payment to those funds in 2016, when a 56 percent telephone tax hike that averted the need for a pre-election property tax increase will run short.

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