Ill. lawmakers give Chicago $200M pension payment break

Elizabeth Campbell and Tim Jones
Bloomberg News

Chicago won a partial financial reprieve from its pension burden Sunday, as the Illinois General Assembly cut by more than $200 million the city’s required 2016 payment into underfunded police and fire retirement systems.

The bill, which would reduce the city’s payments over the next five years, was approved by the Senate in a 38-20 vote.

While it would relieve some of the immediate cost pressure, the measure doesn’t reduce Chicago’s risk of insolvency from $20 billion in unfunded liabilities or its long-term financial obligation. It also risks more credit downgrades.

“It’s not kicking the can down the road,” Senate President John Cullerton, a Democrat, said moments before his chamber’s vote in Springfield. “It’s restructuring the obligation to get these things funded, and it’s doing it in a way that’s responsible.”

Chicago Mayor Rahm Emanuel sought the payment reduction, which cuts to $330 million a scheduled additional contribution of $550 million to the police and fire funds due next year.

“It is a critical first step to mitigate the $600 million property-tax increase that current law mandates for Chicago taxpayers while ensuring that our police and fire pensions are fully funded,” Emanuel said in a statement Saturday.

Growing pension liabilities have contributed to dramatic reductions in Chicago’s credit standing, and Moody’s Investors Service warned in a May 1 report that delaying the financial day of reckoning would not help the city’s financial reputation or the solvency of its retirement systems.

Moody’s lowered Chicago’s credit rating to junk on May 12 after the state Supreme Court rejected Illinois’s 2013 pension overhaul, limiting the options for altering the city’s system.

Among the nation’s biggest cities, only Chicago shares junk status with Detroit, which emerged from bankruptcy in December.

State lawmakers approved the law requiring the increased payment in 2010, allowing the city five years to come up with a plan to comply. Although the property tax is Chicago’s largest general revenue generator, Emanuel and city council members have been loathe to support an increase in the unpopular levy.

Neither Emanuel or his opponent in the April 24 election, Jesus “Chuy” Garcia, supported a property tax increase during the campaign. The mayor said it would be a “last resort” to address the city pension crisis.

Illinois isn’t likely to come to Chicago’s rescue because it has $111 billion in unfunded pension obligations and has the lowest credit rating among states. Rauner told members of the Chicago City Council recently that there would be no bailout.