Chicago Mayor Rahm Emanuel's proposed $6.5 billion corporate fund budget for 2013 won the endorsement of a local government fiscal watchdog group for its structural improvements, but the group also warned of the urgent need for pension reforms.

The Civic Federation of Chicago in its review released last week praised the proposed budget for holding the line on property taxes and other taxes and fees and reducing the use of non-recurring revenues to eliminate a $300 million deficit.

The group also praised management proposals to rein in spending and raise more revenue through better management of healthcare claims, purchasing changes, more aggressive debt collection, and expanded opportunities for managed competition.

The budget also speeds up the phasing out of the city's employee head tax levied on employers.

Although down, the budget does continue to rely on some one-shots including debt restructuring and tax increment financing surplus funds to trim $47 million off the deficit.

"The city is in a stronger financial position today because of critical reforms implemented by Mayor Emanuel and his team," said the federation's president, Laurence Msall. "We are concerned, however, that the city has not yet completely eliminated its reliance on one-time revenue sources."

With a deficit of $580 million projected for 2015, steps taken in the past two years to narrow the structural gap must be expanded in the future and the city needs to work with unions and keep pressure on state lawmakers to reform pensions, the federation warned.

The city faces a spike of more than $700 million in its pension payments for its fire and police funds in 2015 absent any relief from the state government. Emanuel floated a series of pension reforms over the spring, but it's uncertain how soon lawmakers may take up any local government pension changes. They are expected to address reforms for the state system early next year.

"The pension funding crisis threatens to erase all progress made to stabilize city finances," said Msall. "The mayor and City Council urgently need to focus their attention and political will on fixing this broken system."

The City Council will vote next week on the city's $8.3 billion all funds budget for 2013.

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