Rahm’s pill for pension headache could prove tough to swallow
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The mild applause said it all after Chicago’s lame-duck mayor had delivered, what will likely be his last major policy speech to the City Council before leaving office.
It was hardly a rousing endorsement of Rahm Emanuel’s self-described “bitter medicine” to confront a pension crisis he has only just begun to solve, despite a $2 billion avalanche of tax increases.
Which begs the question — does Emanuel have the clout to deliver any of his ideas on his way out the door? Or will the bold and somewhat risky solutions he proposed Wednesday be ignored by those who inherit the power he is relinquishing?
Asked whether he still has the clout to get it done, Emanuel offered a one-word answer: “Yes.”
“You said I didn’t have it in the past and, every time in the last three months, I’ve proven that I have it and have the votes,” the mayor said.
“This is not about clout. This is about the city’s future. And I think people take that very serious.”
The mayor may be overly optimistic, judging from the avalanche of opposition to his ideas.
Gov.-elect J.B. Pritzker declared Wednesday that he is not pursuing a constitutional amendment that could set the stage for eliminating a pension protection clause that stands in the way of abolishing the three percent compounded cost-of-living increase that, Emanuel claims, will cost Chicago taxpayers $42 billion over the next 40 years.
Chicago Federation of Labor President Bob Reiter, a member of the Chicago Sun-Times board, also declared his strong opposition to wiping out the clause that says public employee pensions “shall not be diminished or impaired.”
“He’s gonna be pushing for a constitutional amendment that broadly attacks the property rights of all people participating in public pensions across the state. That’s not right. It’s not the way to solve the pension crisis,” Reiter said.
“The debt these pension funds hold is not debt because of pensions. It’s because people decided to spend it on other things. Now, the mayor wants to cure the funding shortfall and take more money out of pensions. They want to take away compounded COLA and compound the problem to people who are most vulnerable: senior citizens about to retire. It’s not cool.”
Fraternal Order of Police President Kevin Graham called Wednesday’s pension address “the most self-serving exit speech ever written.”
“The mayor directed those who follow in his footsteps to do what the mayor himself has failed to do: adequately fund city pensions,” Graham said, noting that compounded COLA does not apply to police and fire pensions.
The mayor’s strong pitch for a $10 billion pension borrowing was equally controversial, even though Emanuel argued that it could save Chicago taxpayers “as much as $200 million” next year and as much as $7 billion over 40 years.
Civic Federation President Laurence Msall said it’s not worth the “incredible risk.”
“There’s risk in doing nothing. But there’s also risk in pledging revenues into the future and hoping they will return a rate high enough to justify the cost of the borrowing,” Msall said.
“It is a historic level of borrowing. There has only been one pension obligation bond of that magnitude. … We’d like to see a strategy for how that would be invested before we could make a decision on whether we could support it.”
Msall was equally cool to Emanuel’s plan to put revenues from an elusive Chicago casino and from Pritzker’s plan to legalize recreational marijuana into a “lock-box” for pensions.
“Gambling is not a reliable source. Marijuana is not a reliable source,” Msall said.
“Everyone … who thinks there’s a rosy path of allowing for full legalization of marijuana, and it’s gonna generate so much money needs to look at the states where they’ve done it like Colorado. And look at what the costs associated with administering it are.”
No wonder Emanuel was defensive about his waning clout and about odds of delivering the ambitious plan.
He hopes to go down in history as the financial savior who pulled Chicago back from the brink by making the tough choices his predecessor wouldn’t so his successor won’t have to.
But, whether he will is an open question.
“It may be some bitter medicine — and I get it. But, to my friends in the progressive circles, don’t just think that you’re gonna tax the wealthy as a way to grow this economy. You’re gonna cut jobs doing that,” Emanuel said.
“When I walked in, I don’t remember a plan anybody provided on the pensions. … I am determined to leave the city better positioned to seize the future. If they don’t want to do what I’m advocating, that’s the next mayor’s right. But I am going to make sure the building blocks they choose are there.”
Downtown Ald. Brendan Reilly (42nd) said Emanuel should be commended for making pensions “his last stand” — even if his plan goes nowhere.
“I give him kudos for lighting the spark and trying to get some momentum going on this because it’s needed — now. He’s not gonna be back here next year, but we all will. And we’ve got to find some revenue,” Reilly said.
Emanuel is “100 percent correct” about the need to re-open the Illinois Constitution, but “saying it and doing it are two different things,” Reilly said.
“It’s gonna come down to whether or not there’s the political will in Springfield to open up Pandora’s box. But, that’s the only way taxpayers are gonna get meaningful, long-term relief,” the alderman said.