Quinn quiet on mayor’s pension plan, questions property tax hikes
Illinois Democratic Gov. Pat Quinn is raising questions about whether he would support a plan to bolster Chicago’s underfunded public pensions by raising property taxes, telling reporters today that property taxes are already “overburdening” state residents.
State lawmakers are now debating Chicago Mayor Rahm Emanuel’s plan to prop up city’s pension funds for laborers and municipal workers. Central to that is a proposal to raise property taxes by $50 million each year for five years, which would ultimately net the city $750 million. The mayor also is calling for city workers to chip in more money toward their retirement benefits, and he wants to scale back the rate at which those benefits grow each year.
But Emanuel’s blueprint, which he said would solve about half of Chicago’s nearly $20 billion public pension crisis, first needs approval from the state legislature and the governor, because all Illinois pensions are governed by state law.
Quinn on Thursday would not say whether he would sign the Chicago pension bill if it landed on his desk.
“I don’t know what that bill is, frankly,” Quinn told reporters in Chicago. “I think it has all kinds of different descriptions. They’re, I guess, looking at it in Springfield. When they have something put together we’ll look at it. But I wanna make it clear: I believe in reducing the burden of property taxes in our state.”
Quinn would not detail any specific concerns he had with Emanuel’s pension plan. But he returned repeatedly to the talking points he has been using to push his own 2015 state budget proposal. “The bottom line in our state is we have to reduce our reliance on property taxes and we have to invest in education,” Quinn said.
The governor’s 2015 budget would make permanent a income tax hike enacted in 2011, while guaranteeing all Illinois homeowners a $500 property tax refund. The governor is hoping that will allow municipalities around the state, boosted by trickle-down state income tax revenue, to lower local property taxes, which Quinn thinks disproportionately favor wealthy areas.
The mayor’s Springfield allies put his plan into legislative form on Tuesday, shortly after he outlined it for reporters. The bill passed a key House pension committee on Wednesday, but is still awaiting a debate before the full House.
The State Senate, meanwhile, adjourned for the week on Thursday without taking up the plan.
The blueprint Emanuel outlined earlier this week aims to pump more money into the two pension funds for more than 56,000 city workers -- one for city laborers and the other for municipal workers, including administrators and skilled tradesmen.
By 2020, Emanuel’s plan would finally do away with the archaic math the city has been using for decades to calculate how much money to chip into its workers’ retirements. Experts say that is a primary reason the pension funds have been shorted for decades, leading to their current dire shape. Instead, the proposal in Springfield would slowly ramp up contributions from the city, before switching over to a self-adjusting funding formula.
If the city tries to skimp on payments -- or skip them altogether -- the current proposal allows the pension funds to take Chicago to court, or even garnish City Hall’s share of state grant money.
But the stabilization of the pension funds would also come at a cost for taxpayers and city workers.
The mayor’s proposed property tax hike, which would still need approval from the City Council, would cost the owner of a $250,000 home about $58 more in property taxes each year for the next five years, according to the mayor’s office.
Current and retired city workers would also kick more into their pension funds, but get less out of them. Employee contributions would jump from the current 8.5 percent of each paycheck to 11 percent by 2019.
But the mayor also wants to scale back the rate at which those benefits grow each year. Retirees in the municipal and laborers pension funds currently see their retirement benefits grow at a 3 percent compounded annual rate. The mayor wants to cut that down to a flat 3 percent, or half the rate of inflation, whichever is smaller. And retirees would see no benefit increase in 2017, 2019 or 2025.
Several of Chicago’s most powerful city workers’ unions quickly came out against the mayor’s plan, arguing it violates a part of the Illinois Constitution that says pension benefits “shall not be diminished or impaired.”
That includes the unions for police, firefighters and teachers, whose members all have their own woefully underfunded pensions systems that would not be affected by Emanuel’s proposal. What’s more, the mayor’s plan does nothing to stave off a state-mandated spike in the city’s contributions to its police and fire pensions next year, which will cost nearly $600 million.
The jump in required payments was designed to finally bring the city’s police and fire pensions into the black, after decades of City Hall shorting the funds. But Emanuel has threatened that such a huge, one-time increase would force drastic budget cuts or steep property tax hikes.
A spokesman for venture capitalist Bruce Rauner, Quinn’s Republican opponent in the November election, said in a statement that Rauner disagreed with the mayor’s proposal.
“Bruce has always maintained that true pension reform requires moving towards a defined contribution style system and believes that should also be part of the solution for Chicago,” said campaign spokesman Mike Schrimpf.