CHICAGO - Chicago Mayor Rahm Emanuel will release his 2016 budget a month early.

The budget plan is expected to address how the city intends to tackle a scheduled spike in pension contributions.

Council members received a letter this week from Emanuel's budget director Alexandra Holt asking for cost-cutting and revenue ideas and disclosing that the budget's traditional October release was being moved to September.

The city budgets on a calendar year basis.

"As you know, the city is facing momentous budget and pension challenges," the letter says. "We are accelerating the 2016 budget, which will allow us to quickly tackle these challenges."

The budget plan will include the resources to fund the city's pension obligations. The city's $20 billion pension ills have dragged its credit rating down to a junk level from Moody's Investors Service.

Holt warned "difficult choices" lie ahead to correct past "financial decisions that weren't always best for the city's long-term financial interests."

The administration still plans by the end of July to release its annual financial analysis that lays out the budget projections heading into the next fiscal year; that review does not typically include specifics on how the city will balance its books.

Heading into the next fiscal year the city faces a structural operating deficit of between $300 million and $400 million. In addition, the city faces a $550 million spike in its contributions for police and fire pension funds under a 2010 state law requiring such contributions to be made on an actuarial basis.

Democratic lawmakers last month approved a bill that would trim more than $200 million off the spike by extending by 15 years the amortization period to bring the funds to a 90% funded ratio.

Gov. Bruce Rauner, a Republican, has called the plan another example of "kicking-the-can," making its fate uncertain especially given the budget impasses between Rauner and the legislature's Democratic majority.

The city's 2014 reform package for its other two funds faces a legal challenge with oral arguments set for early next month. That plan calls for a $90 million increase in city contributions. If it's overturned, the municipal and laborers' funds are headed toward insolvency in the next decade.

The city wants a casino to raise new revenue for pensions but bills authorizing one stalled in the General Assembly. The impact on the state budget on the city also is far from clear as the budget impasse continues. Rauner had proposed cutting in half the city's $120 million in shared income taxes.

Several city council members have complained that the administration has not come up with a revenue plan to address its pension pressures, at least one that officials are willing to share.

Alderman John Arena voiced his frustration at a finance committee meeting saying that without a revenue plan the city's proposed $1.1 billion general obligation restructuring plan is "irresponsible."

"It makes it very hard for me to support this strategy because I don't know the strategy," he said.

Many investors have voiced similar frustrations, with many saying with a healthy tax base the city clearly has the ability to cover its obligations but has not shown the political willingness to do so. City officials have countered that they are attempting to strike a balance between reform and revenue to ease the need for a big property tax hike.

The debt restructuring plan will provide some operating budget relief as well as help solve a $2.2 billion liquidity crisis sparked by Moody's downgrades.

 

 

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