Chicago Borrows $220 Million to Make Pension Payments

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In a move akin to paying a mortgage with a credit card, Chicago on Monday borrowed $220 million to make its required 2016 payments to its pension systems.

However, a bill currently sits in the stalemated legislature that would reduce Chicago’s 2016 short-term pension costs significantly by stretching out payments over time.

If that bill is passed – as it is eventually expected to be – Chicago will return the $220 million to its line of credit.

More from the Chicago Tribune:

A potential year-end budget shortfall has forced Mayor Rahm Emanuel’s administration to borrow $220 million in yet another sign of the city’s precarious pension funding status.

The city drew the money down from its $900 million line of short-term credit, which is akin to putting the tab on a credit card. The loan carries an interest rate of about 3 percent.

The money is not due to police and fire pension funds until the end of the year. But the city had to borrow the money to meet a March 1 deadline for having the cash in its treasury, Budget Director Alexandra Holt said. “State law requires that we deposit the money with the treasurer to demonstrate we have the money available if it’s needed,” she said.

[…]

Emanuel’s budget still depended on Gov. Bruce Rauner to sign a bill that would stretch out the payments and reduce this year’s cost by $219 million.

Although the state House and Senate, both controlled by Democrats, approved the bill, they have not sent it to the governor for fear he’ll veto it if they don’t sign on to his pro-business, union-weakening agenda.

The state Supreme Court on Thursday will rule on the legality of the city’s 2014 pension reform law.

 

Photo by Pete Souza via Flickr CC License

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