Madigan drops property tax mandate in pension bill

April 7, 2014

(AP Photo/Seth Perlman, File)
Illinois Gov. Pat Quinn

Illinois House Speaker Michael Madigan is removing a controversial provision from a Chicago pension bill that would have required the City Council to raise property taxes in order ease the city’s nearly $20 billion pension crisis.

The move to strip the property-tax language in the bill came late Monday, just a few hours after Gov. Pat Quinn signalled he would not back a proposed property tax hike that Mayor Rahm Emanuel is pushing in order to bolster the ailing pension funds for Chicago laborers and municipal workers.

“Working with legislative leaders, bill sponsors, the Governor, and our partners in labor, we have addressed their concerns and can now move forward to save the retirements of nearly 60,000 city workers and retirees in Chicago,” Emanuel was quoted as saying in an emailed statement late Monday afternoon.

But the removal of the property tax language doesn’t mean Emanuel’s tax hike proposal is going away. That plan, which would bring the city $750 million in revenue over the next five years, still seems to be central to the mayor’s plan to pump more money into the city’s pensions.

The difference is that state legislators, who must approve changes to Illinois pension law, don’t have to worry about being blamed for raising Chicago property taxes during an election year. The bill’s original language mandated that the City Council raise property taxes to pay for pensions. The latest version allows the city to use “any available funds” to make its annual payments.

Speaking at an event Monday morning, Emanuel said he is not trying to hang a potential property tax hike around legislators’ necks.

“It was never anybody’s intention to have Springfield deal with that,” Emanuel said. “That’s our responsibility. But I do believe to actually give the 61,000 retirees and workers the certainty they deserve, you need reform and revenue. And we’ll deal with our responsibility.”

Emanuel said he will continue to “address people’s concerns” about the pension plan, though he would not speak directly to its fate in the City Council, which would also need to approve any property tax hike.

To placate public worker unions who had wanted a dedicated revenue stream, Madigan’s changes also beef up the penalties if City Hall wriggles out of paying its pension contributions. The bill directs Illinois’ Comptroller to cut off state funding to the city indefinitely if it doesn’t pay its pension tab, and it gives pension funds the right to sue City Hall in order to get their money.

The new bill would also guarantee that retirees who make $22,000 or less in annual benefits would get a cost-of-living increase of at least 1 percent each year. Prior proposals set the annual increases at the lesser of 3 percent or half the rate of inflation. Right now, city laborers and municipal workers get a guaranteed annual benefit increase of 3 percent, which builds on the previous years’ increases.

The changes to the mayor’s proposed pension fix came just hours after Gov. Pat Quinn slammed Emanuel’s proposed property tax hike.

“They’ve gotta come up with a much better comprehensive approach to deal with this issue,” Quinn said at an unrelated press conference. “But if they think they’re just gonna gouge property taxpayers, no can do. We’re not gonna go that way.”

Quinn, a populist Democrat who is seeking re-election in November, has made property tax relief central to his 2015 state budget proposal. And while he shot down Emanuel’s proposed property tax hike, the governor did not offer an alternative source of revenue for Chicago pensions.

“I think they need to be a whole lot more creative than I’ve seen so far,” Quinn said.

State legislators could consider the new amendment as soon as Tuesday.