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 The mayor last week unveiled a plan to hike property taxes by $50
million a year over five years. Worker's current contributions of
8.5 percent of earnings to the city's municipal and laborers
retirement systems would rise to 11 percent over five years. Instead
of retirees getting an annual 3 percent cost-of-living increase, the
increase would be tied to inflation and skipped in certain years.
Now, it would be up to the city to decide how to raise revenue for
pensions within its current tax structure. But the legislation would
continue to require Chicago to pay what it owes annually to the
funds or the state would withhold money due the city. The bill also
gives pension funds the ability to sue the city over payments.
"Working with legislative leaders, bill sponsors, the governor, and
our partners in labor, we have addressed their concerns and can now
move forward to save the retirements of nearly 60,000 city workers
and retirees in Chicago," Emanuel said in a statement.
Earlier on Monday, Quinn told reporters that he objects to the bill
because it would force overburdened Chicago property taxpayers to
help fund the solution.
"They've got to do a lot better with whatever plan they come up with
than just heaping a higher and higher property tax burden on
everyday people whether they live in Chicago or anywhere else," the
governor said.
In a report on Monday, Moody's Investors Service called the previous
version of the legislation a modestly positive credit step but not a
permanent fix.
Moody's said that if enacted into law, the measure would immediately
reduce the unfunded liabilities in the two funds.
"However, we expect that the (liability) would then escalate for a
number of years before declining. Accrued liabilities would exceed
plan assets for years to come, and if annual investment returns fall
short of the assumed 7.5 percent, the risk of plan insolvency may
well reappear," the credit rating agency said in a report.
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Emanuel's office has warned that the two 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.
Moody's said that if enacted, the law would face potential
challenges to its legality under the Illinois constitution, which
prohibits the impairment of retirement benefits for public sector
workers.
The city's police and firefighters pension systems are not affected
by Emanuel's plan. Moody's said city officials are seeking changes
to a state law that requires Chicago to increase its contribution to
those two funds by $600 million.
"The requirement presents a formidable budget pressure for Chicago,"
Moody's said.
Last month, Moody's Investors Service dropped Chicago's credit
rating one notch to Baa1, citing a massive and growing pension
liability that remains a threat to the city's fiscal solvency. Prior
to that downgrade, Moody's slashed Chicago's rating three notches in
July.
(Reporting by Karen Pierog; editing by James Dalgleish and Lisa
Shumaker)
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