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 The legislation, which requires bigger pension contributions from
the city and from its workers, passed the House in a 73-41 vote and
Senate in a 31-23 vote after it was amended late on Monday to remove
any mention of new or higher taxes to fund Chicago's pensions.
Chicago's payments to its municipal and laborers' retirement systems
would increase over five years beginning in 2016 under the
legislation. Worker's current contributions of 8.5 percent of
earnings 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.
But Mayor Rahm Emanuel's plan to lock in a hike in property taxes of
$50 million a year over five years for pensions met with resistance
in the legislature and from the Democratic governor, who told
reporters on Monday that he could not support a move to heap more
taxes on Chicago residents. His spokeswoman said on Tuesday that
Quinn will review the bill.
Under the final version of the bill, Chicago officials will have to
determine how to come up with money for the higher payments.
Severe pension funding problems have led Moody's Investors Service
to cut Chicago's credit rating four notches since July to Baa1, and
some lawmakers worry that Illinois' biggest city might follow the
path of Detroit and other fiscally distressed municipalities that
have filed for bankruptcy.
"The great international city of Chicago simply cannot go the way of
Detroit or Harrisburg or Vallejo or any other city that has declared
bankruptcy," said State Representative David Harris, a suburban
Chicago Republican. "It is too significant a city for us to let that
happen."
But Senate Republican Leader Christine Radogno argued against
addressing Chicago's pension problems in a piecemeal fashion, noting
that the city soon faces a $600 million state-mandated funding boost
for its two other retirement systems covering public safety workers.
"It's irresponsible on our part to rush in and take action when we
don't have the full picture," she said during the Senate debate on
the bill.
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While proponents said that many of Chicago's public labor unions
supported the bill, a labor coalition, We Are One Chicago, issued a
statement following the Senate vote, urging Quinn to veto the
measure, which it called unconstitutional and "nothing more than
another attempt at pension theft." The state constitution prohibits
the impairment of retirement benefits for public sector workers.
House Speaker Michael Madigan, a Chicago Democrat who sponsored the
bill, said it was meant to pass constitutional muster. Senate
President John Cullerton said he has his own constitutional concerns
about the bill that will ultimately be addressed by the state
courts.
The bill requires 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.
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.
(Reporting by Karen Pierog; editing by James Dalgleish, Peter
Galloway and Ken Wills)
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