Rauner suggests deal for Chicago pension relief — City Hall says thanks, but no thanks

It appears Gov. Bruce Rauner may have been listening to his friend Mayor Rahm Emanuel’s gripes about a double taxation Chicagoans face.

But the governor’s proposed solution comes with a caveat.

In a statement released to the Chicago Tribune on Thursday, Rauner said he would support a proposal for the state to help pay for Chicago teacher pension in return for the city no longer receiving special block grants.

“As part of the compromise, we would allow the state to pay normal costs for Chicago teacher pensions, as it does for all other Illinois school districts, in exchange for sunsetting Chicago’s special block grants,” Rauner says in the op-ed.

Rauner says the compromise is part of a change to the state’s school funding formula that comes “at the request of Senate President John Cullerton.” A commission would be made to rewrite the formula by the end of 2016, with the current funding formula to expire six months later, Rauner wrote.

Emanuel has long said it’s unfair that city residents support Chicago teachers pensions with property taxes and also pay into the pensions of suburban and downstate teachers with the state income tax. Proponents of the current arrangement say the education block grants from the state help offset the double taxation.

The mayor’s office on Thursday said although they’re “pleased that, for the first time, an Illinois governor has committed the State to addressing the pension inequity at Chicago Public Schools, the proposal will actually further reduce CPS funding by taking away the block grant funding, “costing the system hundreds of millions of dollars.”

“CPS wants and deserves pension parity with districts like Barrington, Winnetka, and Hinsdale. If Chicago schools were like these wealthy suburban schools, they would be able to spend $1,600 more per pupil in the classroom – classrooms that serve some of the most poverty-stricken children in our state,” Emanuel spokeswoman Kelley Quinn said. “This is not fair to our children, and we look forward to working with the Governor to end this shameful inequity.”

Rauner’s proposal would give CPS $200 million more a year from the state for two years. After that, a new funding formula would have to be created that would eliminate the need for special block grants.

The $200 million the state doesn’t pay now would not go toward paying off the city’s unfunded liability, according to a source close to Rauner’s administration.

Rauner’s plan would also increase the lump sum of funding for high poverty school districts from $85 million to $159 million.

If Mayor Emanuel agrees to the compromise, the state would begin paying CPS a “normal cost” — about $200 million — beginning July 1, the source said.