Chicagoans could help close city pension deficit through increased phone tax

June 25, 2014

Chicagoans would see their telephone taxes jump this fall in order to help ease the city’s massive public worker pension crisis, under a proposal Mayor Rahm Emanuel and dozens of aldermen are expected to introduce on Wednesday to the City Council.

Starting Sept. 1, the city’s monthly 911 tax on cellphones and landlines would increase to $3.90, from the current $2.50, according to a top City Hall source. Under state law, that revenue must be used to fund the city’s emergency call center. But Emanuel’s administration has said the increase will free up about $50 million elsewhere in the budget, giving the city some “breathing room” to help meet rising pension obligations next year, instead of having to raise property taxes.

"Property tax increases can now be off the table this year, and this ordinance will allow us to pass four consecutive budgets without raising property, sales or gasoline taxes," Emanuel was quoted as saying in an emailed statement.

Emanuel’s administration says raising the monthly phone tax also has broad political support in the City Council. Thirty-eight aldermen – a clear majority in the 50-member body – were expected to sign onto the mayor’s proposal as it was introduced Wednesday, the source said.

The mayor had been pushing a $50 million-a-year property tax increase to help City Hall pour more money into two of its pension funds, which Chicago has been underfunding for decades. But the mayor got pushback from both Democratic Gov. Pat Quinn and some aldermen, all of whom face elections in just a few months.

The mayor’s change of heart seems to have been part of some political bargain with the governor.

Quinn had been sitting on an Emanuel-backed bill that cuts pension benefits for city laborers and municipal workers, and requires City Hall to pump more money into those funds. For weeks, the governor slammed the mayor’s call to raise property taxes and wouldn’t say whether he’d sign the bill into law.

But in the waning days of the spring legislative session, the governor quietly signed another bill that would allow Chicago to hike its 911 telephone taxes. Just a couple of days later, Quinn finally signed the Chicago pension bill into law, while Emanuel vowed he would not raise property taxes for at least another year.

The proposal to raise Chicago’s phone taxes still needs approval from the full City Council, which could happen at its next regular meeting in July. By implementing the tax hike immediately, the city would bring in an additional $12 million in 2014, and another $40 million next year, according to the Emanuel administration.

But the new revenue from higher 911 fees hardly solves Chicago’s municipal pension crisis, which, at roughly $20 billion, is among the worst in the country. Emanuel still has not said specifically how he plans to meet a state-mandated $550 million spike in police and fire pension payments that is due in 2016. Chicago also faces a big increase in pension payments for Chicago teachers next year.

Correction: The number of aldermen who signed onto the bill is 38, not 36.

Alex Keefe is political reporter at WBEZ. You can follow him on Twitter and Google+.