Emanuel budget avoids pension woes
Just months before facing voters at the polls, Chicago Mayor Rahm Emanuel on Wednesday unveiled a 2015 budget plan that boosts popular city services and closes an estimated $297 million spending gap with a menu of revenue increases.
But the $8.9 billion spending blueprint does not address what is arguably the city’s most pressing financial challenge: a $550 million balloon payment to the city’s drastically underfunded police and fire pension funds, due in 2016.
Instead, Emanuel spent much of his election season budget address to the City Council highlighting his past accomplishments, rather than getting into the details of his spending proposal.
“We are making real progress, but we still have a long way to go,” Emanuel said. “For the fourth year in a row, we will balance our budget and hold the line on property, sales and gas taxes.”
But Emanuel’s proposal does close the projected deficit, in part, with $54.4 million from what his administration calls “closing tax loopholes and revenue enhancements.”
That includes $10 million in new money from an increase of the tax levied on paid parking garages; $4.4 million by cutting a tax exemption for people who who rent skyboxes at Chicago sports venues; $12 million by eliminating a tax break for cable TV companies, effectively raising their tax burden; $15 million by increasing the lease tax on cars and office equipment; and $17 million by cracking down on companies who rent office space in other towns to avoid paying city sales and use taxes.
The mayor’s bean counters are also relying heavily on an improving economy to help balance the books. They’re estimating a $75.4 million take from growth in the number of building permits and inspections as the construction industry improves, and from a big boost in revenues tied to consumer behavior, such as the sales tax.
City Hall is also expecting to find nearly $81 million next year through various cuts and belt-tightening measures, but an Emanuel spokeswoman says there will be no city worker layoffs. Another $60.5 million comes from “improved fiscal management,” including declaring a surplus in some of the city’s tax increment financing districts, and $26.1 million comes from cracking down on people who owe back city fines and fees.
But ahead of the Feb. 24 city elections, Emanuel’s spending proposal does not neglect the city services that have long been the currency of Chicago politics. The mayor wants to double the number of pothole crews that repair pock-marked city streets, and boost spending for graffiti blasting, tree-trimming and rat-baiting. He also wants to increase funding for youth summer jobs, early education and after school programs.
Emanuel made only passing mention of the city’s $20 billion public worker pension crisis, leaving open the possibility that voters won’t know the mayor’s plan until after the Feb. 24 city elections.
After decades of shorting its pensions, City Hall will finally have to bring its pension payments up to speed in 2016 with an estimated $550 million spike in its state-mandated contributions for police and firefighters’ retirement funds. Emanuel has already brokered an overhaul of the pensions for city laborers and municipal workers, but he still hasn’t revealed how he plans to deal with the public safety pension problem.
“Unfortunately, due to difficult economic times and decades of deferral, we still have a lot of work to do,” Emanuel said Wednesday. “But by everyone giving a little, no one has to give everything.”
Emanuel initially proposed a property tax hike to pay for the higher contributions to the laborers’ and municipal workers’ pensions. But facing political pushback, he struck a deal with Gov. Pat Quinn to raise the city’s telephone taxes, buying him a year before he’d have to turn to even more unpopular tax hikes.
City Council budget hearings are set to begin Monday, and aldermen must approve a 2015 budget by the end of the year.