Chicago mayor, council eye phone
surcharge for pensions
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[June 26, 2014]
CHICAGO (Reuters) - Chicago would
raise a monthly emergency service surcharge on phone lines to free up
$50 million in operating funds to increase its payments to two city
pension funds under a proposed ordinance introduced on Wednesday.
Mayor Rahm Emanuel and 36 city council members backed the
ordinance, which would increase the current surcharge, generating an
additional estimated $12 million this year and $40 million next
year. The measure would allow Chicago to avoid a hike in property
taxes, which are largely used to fund the city's four retirement
"This revenue will support (the Office of Emergency Management and
Communications) and fund a vital emergency service for residents,
while allowing the corporate fund to end its subsidy of the 911
center and instead make the additional $50 million payment required
for the first year under the reform plan for the Municipal Employees
and Laborers pension funds," a statement from the mayor's office
The Illinois Legislature earlier this year approved the higher
surcharge, as well as reforms requiring the city and workers to
increase pension contributions to the two retirement funds. The law,
which also ties cost-of-living adjustments for pensions to inflation
while skipping the adjustments in certain years, lets Chicago decide
how to raise money for the increased pension payments.
Emanuel's office has warned that the municipal and laborers' systems
face insolvency within nine to 17 years unless changes are made. The
funding shortfall is $8.4 billion for the municipal system and $1
billion for the laborers system, according to city documents.
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Severe pension funding problems has led Moody's Investors Service to
cut Chicago's credit rating four notches to Baa1 since July 2013.
(Reporting by Karen Pierog; Editing by Eric Walsh)
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