chicago pension debt

Illinois Gov. Rauner Proposes Bankruptcy As Strategy for Taming Municipal Pension Debt

Illinois Gov. Bruce Rauner didn’t touch on pensions during his State of the State address this week.

But in a list of policy proposals handed out to lawmakers, Rauner suggested giving municipalities the power to file for bankruptcy as a way to tame pension debt.

Even if towns and cities didn’t act, the threat of bankruptcy could give them leverage in pension negotiations with workers.

From the Chicago Tribune:

Gov. Bruce Rauner wants to give cities, towns and counties the authority to file for bankruptcy protection, a move that could give local governments a stronger foothold when negotiating with local police and fire officials over costly pension obligations.

[…]

Rauner aides would not elaborate on how it might work.

But the single sentence calling for the state to “extend to municipalities bankruptcy protections to help turn around struggling communities” mirrors a proposed law introduced last month by state Rep. Ron Sandack, R-Downers Grove. Sandack said his aim was to give cities more tools for getting their financial affairs in order, including a “level field” when negotiating over pensions.

Federal law only allows municipalities to file for bankruptcy with explicit permission from the state where they are located, said James Spiotto, a municipal bankruptcy expert and attorney who is managing director of Chicago-based Chapman Strategic Advisors.

Currently, only the Illinois Power Agency has been given such authority. It would take passage of a new state law to extend the authority to municipalities.

Chicago Mayor Rahm Emanuel was quick to dismiss the idea that the city would use such a tactic to lower its pension costs, according to the Tribune.

On Pensions, Chicago Mayoral Candidates Mum on Specifics

On Friday, Chicago’s five mayoral candidates debated in front of the Chicago Sun-Times Editorial Board, seeking the newspaper’s endorsement.

Pensions was among the first issues to come up – and while everyone agreed that Chicago’s pension debt needs to be tamed, the candidates were largely mum on specific ways to accomplish that goal aside from a few tax proposals.

From the Chicago Sun-Times:

You might think there would be no avoiding the issue that is sure to dominate the next mayor’s agenda.

Unfortunately, a lack of specifics from Mayor Rahm Emanuel has made it easier for the others to dodge as well.

The mayor couldn’t be budged from what I’ll call his “Trust Me” speech in which he recounts his track record on financial matters, which includes more responsible annual budgeting than his predecessors plus legislative deals that reduce pension benefits and increase pension contributions for some city employees and retirees.

With a great deal of prodding, Emanuel acknowledged he’s not ruling out a property tax increase to help bring down the city’s huge pension liability.

[…]

Fioretti, who flatly rules out a property tax increase, is the only candidate ready to put alternative revenue sources on the table. His calls for a commuter tax and/or a financial transactions tax on Chicago’s trading exchanges undoubtedly have some populist appeal.

[…]

At least Fioretti is willing to stick his neck out for something. Cook County Commissioner Jesus “Chuy” Garcia couldn’t have been more vague about what he has in mind, arguing there are still too many unknowns about the scope of the problem until the Illinois Supreme Court has ruled on pension reform legislation.

Garcia also said he opposes reducing pension benefits to current retirees, which was a key part of Emanuel’s pension legislation. That means Garcia would need to find even more revenue.

Chicago voters have just three more weeks to demand real answers.

Watch the video of the debate here.

Photo by bitsorf via Flickr CC License

Video: Chicago Mayoral Candidates Talk Pensions

Chicago’s five mayoral candidates sat down with the Chicago Sun-Times editorial board on Friday to discuss their positions on a variety of issues.

But the first issue discussed – and one identified by the Sun-Times as most pressing to the city – was Chicago’s pension debt and how the candidates plan on handling it.

Listen to their answers in the video above.

Photo by Pete Souza via Flickr CC License

Chart: Chicago’s Pension Debt, Visualized

Among the country’s largest cities, Chicago’s pension debt is unmatched — in a bad way. Check out the chart above to see just how much pension debt Chicago is shouldering compared to other large cities.

Here’s how Chicago’s unfunded liabilities broke down by system as of 2012, according to the city’s website:

– Municipal Employees’ Annuity & Benefit Fund of Chicago (MEABF): $8.2 billion
– Laborers’ & Retirement Board Employees’ Annuity & Benefit Fund (LABF): $0.9 billion
– Policemen’s Annuity & Benefit Fund (PABF): $7.0 billion
– Firemen’s Annuity & Benefit Fund (FABF): $3.1 billion
– Chicago Teachers Pension Fund (CTPF): $7.1 billion
– Park Employees Annuity and Benefit Fund (PEABF): $0.4 billion

For Chicago, Property Taxes Still A No-Go As City Turns Elsewhere to Fix Pension Pains

In Chicago, property taxes are among the most politically unpalatable ideas one can bring to the table.

But Illinois law requires the city to dramatically increase its payments to its two major pension funds to the tune of $500 million by 2016. In the past, the city has levied property taxes a year or two in advance of the payments in order to fund the required contribution.

One glance at Chicago mayor Rahm Emanuel’s actions of late, however, confirms that property taxes remain off the table. Tasked with improving the fiscal health of the city’s pension systems, Emanuel is exhausting all his policy options—without turning to property tax increases.

From the Chicago Tribune:

Since taking office in 2011, Emanuel has cut the size of the city workforce, reduced health care costs and found other efficiencies, like organizing garbage collection by grids rather than a ward-by-ward basis.

The mayor also has increased a host of fees, fines and taxes. He’s held the line on property tax hikes at City Hall, though Chicago Public Schools has increased them under his tenure. Some revenues, like real estate property taxes, sales taxes and income taxes, have rebounded slightly as the economy has slowly improved.

Emanuel previously declined to identify any way to come up with additional city revenue for the city worker and laborers funds until he had worked out an overall pension change plan this spring that lowered annual cost-of-living increases for retirees and boosted employee pension contributions. He’s taking the same approach to police and fire pensions by declining to discuss additional revenue before an overall pension change plan is worked out.

Pension360 covered earlier this week a hike in telephone fees that will net the city $50 million this year and next.

Still, Chicago’s budget gap is projected to be around $297 million in 2015. With the $500+ million pension payment looming as well, the pressure is mounting and Chicago officials may have to make some politically unpopular decisions.

City officials can still change their minds and hike property taxes—but the deadline to do so is last Tuesday of December 2015.