Chicago Pension Reform in Need of More Votes

CHICAGO - Chicago's proposed rescue for two of its four pension funds lost momentum in the General Assembly as backers struggled to drum up votes and Gov. Pat Quinn refused to say whether he'd even sign it.

Chicago and the legislative sponsors of the overhaul had initially hoped to fast-tack the package, introducing the reforms in legislative form and quickly pushing it through committee Wednesday.

Mayor Rahm Emanuel's administration released details late Monday of the plan that would shore up the city's laborers' and municipal funds through higher city and employee contributions and benefit cuts. Contribution levels are set in state statute.

The package's heavy reliance on property taxes to cover higher city contributions ran into opposition from many Republicans and some city Democrats. The Democratic leaders want some Republican votes behind the package.

The legislation would allow the city to raise property taxes by an annual $50 million over a five year period to generate $750 million for the funds. It would raise the overall levy by $250 million from its current level.

Chicago is struggling under the weight of $19.5 billion of unfunded obligations with about half of those liabilities in the two funds that are the subject of the overhaul. The strain of the obligations has driven a series of rating downgrades. Moody's Investors Service rates the city's general obligation bonds Baa1 with a negative outlook with Fitch Ratings assigning an A-minus and Standard & Poor's an A-plus and negative outlook.

Although the city contends most of the more than 30 unions that represent affected employees support the plan, a handful of unions have called it unconstitutional and are urging its rejection.

"They are still trying to work on the roll call," said Steve Brown, spokesman to the legislation's sponsor House Speaker Michael Madigan, D-Chicago.

Madigan on Wednesday has said he intended to call the bill for a floor vote after it passed out of committee but the House adjourned as backers struggled to garner the needed votes.

The initial "consensus" among the city and its legislative sponsors was to bring the bill up for a vote on the same day in each chamber, with action beginning in the House. The House adjourned late Thursday afternoon and returns Friday. The Senate adjourned Thursday and won't return until Monday making any vote unlikely until least next week and giving opponents more time to gain momentum.

Several lawmakers said they wanted language dropped from the bill that specifies property tax increases would cover half of the city's higher contributions. Under the bill, a separate levy would be enacted and called the Pension Stabilization Levy. Madigan amended the bill allowing for the City Council to decide on the property tax increase, a burden for council members as they head toward re-election next year.

Also on Thursday, Quinn declined to take a position on the pension reforms when asked about them at an event and suggested he didn't like the property tax hikes either. Quinn has proposed making permanent a temporary income tax increase to support the state's budget. His plan would double property tax relief for homeowners.

"They're looking at it in Springfield and when they have something put together, we'll look at it. I want to make it clear, I believe in reducing the burden on property taxes in our state," Quinn said when asked whether he'd sign the package into law.

Some lawmakers also are critical of the bill for failing to address the city's police and fire funds. While they are underfunded too, previous legislation aimed at stabilizing public safety funds will push the city's contribution up next year by $600 million. Emanuel has said the city can't afford that level of cuts and a property tax hike of that magnitude would drive out businesses and residents.

The Civic Federation of Chicago on Thursday said it supports the proposal as a "balanced approach" and urged lawmakers to approve it.

"The solution proposed by the city is not perfect; we would much prefer that all public employee retirement systems be fully funded at the level recommended by actuaries. However, this is a reasonable proposal that addresses the urgent need to begin the process of saving Chicago's pension funds," the federation said in a blog post. "Adopting these reforms will provide both the Municipal and Laborers Funds with long-term fiscal solvency and stability."

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