Chicago Mayor Rahm Emanuel’s administration is swatting down key aspects of the Chicago Teachers Union’s proposal to shore up the ailing pension fund for city teachers.
On Tuesday, Emanuel suggested a proposed tax on financial transactions would hurt the big Chicago-based financial exchanges like the Chicago Board Options exchange and CME Group, which owns the Chicago Board of Trade and other exchanges. The Chicago Teachers union is pushing what it calls a “LaSalle Street tax” on futures and derivatives trades. CTU estimates it could reap $10 billion to $12 billion a year.
But Emanuel seemed to dismiss that idea when asked about it Tuesday.
“Years ago, people referred to ‘Lasalle Street’ because it was a financial center, and Chicago had a lotta banks that were…Chicago-based. There’s only one left. They’re all gone.”
Emanuel also suggested a financial transaction tax might hurt the city’s thriving futures and options industry.
“That’s a place where Chicago’s still, economically, a dominant player,” Emanuel said. “And there’s more competition.”
The transaction tax was just one part of the Chicago Teachers Union’s pension plan, first reported last week by WBEZ. The union wants to borrow $5 billion to help shore up the underfunded Chicago Teachers Pension Fund. Right now, the fund only has about half the money it would need to pay out in future benefits, for about $9 billion in projected future pension debt.
The union’s plan would pay for the borrowing with several new streams of revenue. In addition to the transaction tax, the teachers would also impose a “commuter tax” on people who work in the city but live elsewhere. Union officials also propose extending the life of the city’s tax increment financing districts, or TIFs, which divert tax money into economic development projects. The union would use the extra money generated during the life of the TIFs to pay for their proposed borrowing.
But Emanuel’s administration is giving those ideas a chilly reception, raising questions about whether the two sides can reach any sort of compromise on pensions before next year. In 2015, Chicago Public Schools’ state-mandated payment into its teachers pension fund will jump to $613 million - a roughly $400 million spike - after three years of making reduced payments into the fund.
Emanuel didn’t directly address the question of a tax on commuters, but mayoral spokeswoman Kelley Quinn said City Hall doesn’t have the authority to levy such a tax.
“It would be unconstitutional under the Federal constitution for commuters living out of state, such as Indiana and Wisconsin,” Quinn said via email. “It would also be unconstitutional under the Illinois constitution as to Illinois commuters.”
Additionally, Emanuel said a financial transaction tax would first require approval from both state lawmakers and federal regulators.
Emanuel has said repeatedly that he wants pension negotiations to focus on “reform before revenue,” which some critics have interpreted as referring to the type of benefit cuts the mayor has pushed for the city’s laborers and municipal workers. But Chicago Teachers Union President Karen Lewis, a vociferous adversary of Emanuel’s, has said tackling benefit changes first without new revenue streams in place would be like “cutting our own throats.”