CHICAGO — Illinois Gov. Bruce Rauner is escalating pressure on Chicago Mayor Rahm Emanuel to help pass his agenda by offering up a sweeping fiscal fix for the Chicago Public Schools' pension woes.
But the offer comes with unacceptable conditions, Emanuel said.
On Thursday, Rauner offered up a relief plan for Chicago Public Schools' pension funding requirements, but linked it to support for his "turnaround agenda;" the freshman Republican governor wants worker's compensation and tort reforms, constitutional amendments on term limits and redistricting, and a temporary property tax freeze. Democrats who control the state legislature haven't been willing to accommodate him.
"This has to be a two-way partnership," Rauner said.
"We are eager to help Chicago Public Schools we are eager to help the city of Chicago," Rauner said during a news conference. "At this point the city of Chicago and the mayor have been unwilling to help us in our reform agenda to help the state."
Emanuel later fired back that help for the district and its students shouldn't be held "hostage" by the freshman GOP governor's demands.
The latest salvos show that little progress has been made on resolving an impasse that has stalled adoption of a spending plan for the fiscal year that began July 1.
The Chicago schools are banking on state help to deal with a $700 million pension contribution due this year and its leaders have said the fiscal 2016 budget they will release Monday or Tuesday will assume that help comes by the end of the year.
The district's budget and pension struggles have dragged its ratings from Fitch Ratings and Moody's Investors Service down to junk.
Rauner offered plan Thursday that would allow the Chicago schools to defer $600 million of its pension contribution, while the state would cover for two years the same portion of contributions it covers for other districts, providing $200 million in annual help. Teachers would be required to cover about $150 million of their contributions now paid by CPS and its extra grant funding would be preserved.
Rauner has tied his help for CPS and an overhaul in school funding formulas to the local government property tax freeze. Democrats have offered some support on that front, but bills proposed by the Democratic majority lack Rauner's provisions to curb collective bargaining powers and contract rules. He considers those changes essential "tools" local governments need to deal with the freeze. Democrats oppose those efforts.
Emanuel said he stands "ready to work with him" on some issues like worker's compensation reforms, but is opposed to so-called "right-to-work" curbs.
"I don't think though the children of the city of Chicago should continue to be played as a pawn in another agenda item," he said during an interview on the WTTW local news program Chicago Tonight.
Rauner has sought to highlight that Chicago has been willing in the past to back collective bargaining changes in "one-off" deals, citing 2011 changes that took the length of the school day out of bargaining so Emanuel could extend it. The district also now wants a change that would allow it to force teachers to cover $150 million of their contributions now paid by CPS.
"That's a special deal for Chicago" that all local governments should enjoy, Rauner said.
"The governor has to understand there is a way to get this done," Emanuel said. "What's happening here and the reason there's no progress is a lot of name calling, a lot of finger pointing. My view is stop it. That doesn't work."
Rauner has largely focused his attacks on House Speaker Michael Madigan, D-Chicago, and the lawmakers he says Madigan controls. Senate President John Cullerton, D-Chicago, has also come under fire but Rauner has said if not for Madigan's interference he could achieve deals with Cullerton and Emanuel.
The budget impasse is hurting social service agencies because the state can't appropriate payments for them without a budget. On Wednesday the Metropolitan Pier and Exposition Authority suffered a stinging credit blow due to the stalemate.
Standard & Poor's and Fitch Ratings dropped the authority's ratings from AAA and AA-minus, respectively, to one notch below the state's A-minus rating as it now views the credit as subject to state appropriation risk. Spreads widened in secondary market trading on the authority's debt by about 50 basis points.
"The [MetPier] downgrade is a direct result of the financial mismanagement and the impasse and I wouldn't be surprised if we don't get something done that there would be more of that," Rauner said.
Rating agencies have warned that without progress on structurally balancing its books, the state faces a fall into the BBB category, a rarity for a sovereign state with broad powers on taxation and spending. Standard & Poor's specifically has warned it could act within the next two months. It has the rating on CreditWatch with negative implications.
Rauner reiterated his position that higher taxes alone won't solve the state's fiscal woes and that his turnaround agenda items are key to achieving structural reform that will "prevent future credit downgrades."
In developments this week, the Senate passed a bill that calls for the state to pick up $200 million in CPS pension costs and shifts the $150 million teachers' contribution picked up by CPS over to teachers but its fate in the House is uncertain. The Senate also passed a measure that appropriates $500 million in federal funds allowing them to be spent. That measure is expected to pass the House when it returns Tuesday and it is supported by Rauner.
