Chicago property owners will take a far bigger hit for teacher pensions, but their aldermen will escape another difficult vote, thanks to the legislative compromise approved Thursday to ease the financial crisis at the Chicago Public Schools.
When Mayor Rahm Emanuel offered more than a year ago to raise property taxes for teacher pensions, the amount he talked about was $170 million.
In February, a tentative agreement unanimously rejected by the Chicago Teachers Union’s 40-member bargaining team upped the ante with a CPS promise to raise “at least $200 million in revenue.”
Now, beleaguered Chicago homeowners are facing a $250 million increase for teachers pensions. And that’s on top of the $588 million property tax increase approved by the City Council last fall for police and fire pensions and school construction.
Still, a hoarse, exhausted, but relieved Emanuel said he was staying true to the “three-way handshake” to stabilize CPS finances that he outlined a year ago Friday.
“I said the state had to step up and do something it had never done: treat teachers pensions and Chicago taxpayers with the same fairness and equity they do across the state, but not Chicago. That happened. And I acknowledged also that … our taxpayers would have to step up. I was honest about it. … The reason we got into this was because nobody was honest in the past. And third, that our teachers were going to be part of that solution,” the mayor said.
“The building blocks to what I announced on July 1  is exactly what’s there. I don’t take it lightly. On the other hand, I did bring in the state as part of that solution and also our teachers as part of that solution. That’s the right thing to do because . . . it creates equity. And the state now with this payment understands that they can no longer [continue] this disconnect between how teachers and taxpayers are treated around the state as opposed to Chicago.”
But how did an increase that started at $170 million get 47 percent higher?
“It’s part of a compromise. It was also part of getting the state to be part of that solution. That’s what you do when you work through a series of issues that are important,” the mayor said after the vote.
A top mayoral aide, who asked to remain anonymous, added, “We had to raise the rate. We didn’t get quite as much as we wanted from Springfield. The state is stepping up. They wanted to see the city step up. Politically, there was a demand for equal parts. We were also working back from the number we needed to get to sustain CPS.”
Another key element of the deal was allowing aldermen to avoid having to vote on the $250 million property tax increase just as property tax bills reflecting the record increase they approved last fall are due to arrive in their constituents’ mailboxes.
“Given the historic underfunding by the state, we felt that going to the City Council wasn’t needed. That a simple authorization from the Board of Education was sufficient,” the mayoral aide said.
Ald. Howard Brookins (21st), chairman of the City Council’s Education Committee, said it’s a “tremendous relief” to learn that he and his colleagues will not have to walk the political plank — again.
“We would have had no choice. How do you not take a vote to open the schools on time? But if it’s put on CPS, it can be explained that it’s not us. It will be a sigh of relief for all 50 City Council members,” he said.
Letting aldermen off the hook for the school property tax should make it easier for Emanuel to win City Council approval of the tax increases that will be needed to save the Municipal Employees Pension Fund. That’s almost certain to require $200 million in new revenue over five years.
“That’s one less difficult vote. There’s one big thing left to go. There’s light at the end of the tunnel. We can finish the fiscal job. Politically, it gives us the ability to tackle the next challenge without worrying about the one that’s right in front of us” at CPS, the Emanuel aide said.
The Chicago Sun-Times reported earlier this week that Emanuel is closing in on a deal to save the largest of Chicago’s four city employee pension funds that calls for a mix of cost-cutting employee trade-offs and new revenues from beleaguered Chicago taxpayers.
Possibilities include a “stormwater stress tax” on big-box stores and other business giants that put pressure on the sewer system; an increase in the utility tax on electricity, natural gas and telecommunications; a fee specifically for pensions that would be tacked on to water bills and yet another property tax increase.
On Thursday, City Hall sources acknowledged that the larger-than-expected, $250 million property tax increase for teacher pensions makes it more likely than not that Emanuel will steer clear of a third property tax increase to save the Municipal Employees Pension Fund.
The mayor was non-committal. He would only say that, of the five pension funds that were dragging down Chicago finances when he walked in the door, four are now “financially set and secure” or on the road to getting there.
“I have never shied away from making sure that these funds would be, rather than financially at risk, secure for peoples’ retirement and doing it in a way where both taxpayers and employees participate,” he said.
“I can’t tell you exactly how, but I’m gonna secure the Municipal because I think that’s a way … of securing Chicago’s economic and financial future.”
Even without a third property tax hike, Chicago homeowners whose property taxes have been a relative bargain compared to surrounding suburbs will see the city’s portion of the tax that everybody loves to hate nearly double over the next few years. An $838 million increase. Talk about sticker shock.
In hindsight, Brookins said it would have been far better politically to have taken one kitchen sink vote to “fix all of our woes as opposed to a series of votes.”
“Now, our opponents can say, ‘They voted three times to raise our taxes,'” Brookins said.