CHICAGO – The Legislature’s approval of a plan to reduce Chicago’s multibillion-dollar pension shortfall is creating an election-year quandary for Gov. Pat Quinn, who must decide whether to indirectly sign off on a $750 million tax hike or risk derailing aid for a city in serious financial trouble.
Quinn has railed against the property tax in his re-election campaign, calling it a “lousy” tax that unfairly burdens the middle class. He has declined to say whether he’ll sign the legislation but said Wednesday he was happy a provision that explicitly called for the tax increase was stripped from the bill after he said he wouldn’t support it.
The situation also marks another awkward moment between Quinn and Mayor Rahm Emanuel, as the two Chicago Democrats – who both face re-election in coming months – promote sometimes competing interests.
Emanuel says the state must OK his pension overhaul – which the mayor negotiated with unions and hinges on the property tax increase – to avoid even larger tax hike, severe cuts in services and the potential insolvency of the city’s retirement funds.
“I think the bill that passed, I must take a hard look at. It’s going to take a little while,” said Quinn, who has suggested Emanuel look at other revenue options, such as closing corporate tax loopholes. “It’s a pretty complicated bill and I’m going to look at it from top to bottom.”
Emanuel said he worked out the deal with about two dozen labor unions with the understanding it would include the property tax.
“One of the reasons they came together is because we stepped up, they stepped up,” he said. “In this effort the goal was everybody gives something so nobody has to give everything. That’s why, in my view, it was a responsible plan.”
Chicago has the worst-funded pension systems of any major U.S. city, with a $20 billion shortfall in its four accounts and another $7 billion debt in the fund for teachers. Emanuel, who still must address police, fire and teacher pensions, must get approval from the General Assembly and Quinn for any pension changes.
The measure fast-tracked through the Legislature Tuesday would affect about 57,000 employees and retirees in the municipal workers and laborers’ retirement accounts. It would nearly eliminate the $9.4 billion shortfall in those funds by cutting benefits and increasing contributions for both the city and employees. Emanuel wants the city’s additional contributions to come from a property tax increase of about $750 million over five years.
The tax hike was originally included in the legislation filed by House Speaker Michael Madigan, a Chicago Democrat. But Madigan removed that language after legislators balked at taking the blame and Quinn said it was “No can do.” The final legislation approved Tuesday instead left the decision on how to raise the revenue to the Chicago City Council.
But it’s still a trick bag for Quinn, who faces Republican businessman Bruce Rauner in the November election.
Rauner, of Winnetka, has pushed for public employees to be moved to a 401K-style retirement system. And he has repeatedly blasted Quinn for increasing Illinois’ income tax – a 2011 jump that was supposed to be temporary but that Quinn now wants to make permanent in order to avoid massive cuts to education and other areas.
Quinn has 60 days to decide whether to veto the bill. Madigan noted the measure passed the House with enough “yes” votes to override a veto. The same is not true in the Senate, but Madigan predicted that won’t be an issue.
“In the end I think the governor will sign the bill,” Madigan said.