CHICAGO - Mayor Richard Daley has spotted a tempting honey pot, but raiding it could stir a swarm of stinging bees.
That's the word from some finance experts on Mr. Daley's proposal to divert money from two pension funds that city officials say are flush. The plan would shift $56 million a year from the two funds into politically popular tax cuts and construction projects, while shifting another $20 million a year to shore up two weaker city pension funds.
The tax cuts and neighborhood projects would kick in just before Mr. Daley's presumed 1999 re-election race.
City officials say the plan simply unlocks surplus capital to give taxpayers a break, while guaranteeing the financial stability of all four city pension funds.
At issue is property tax money that's contributed annually to the $3.7 billion Municipal Employees' Annuity and Benefit Fund and the $1.1 billion Laborers' Fund. The municipal and laborers' funds are 84% and 124% funded, respectively.
Under his proposal, the mayor wants permission from the Illinois General Assembly to shift $20 million a year to strengthen two other funds: the $812 million Firefighter Fund and $2.6 billion Police Fund. Those two funds' funding levels are 60% and 53%, respectively.
Mr. Daley also wants to shift $20 million a year to property tax relief, $18 million to neighborhood streets and other local infrastructure projects, $5 million to new computers and $13 million to replace the business head tax, which costs businesses with at least 50 employees $4 per worker per month.
Critics note city pension funds already fall short of tougher new standards adopted two years ago for state funds. Moreover, the value of the pension funds can fluctuate sharply with the stock and bond markets, which are increasingly volatile.
"We're concerned about the potential for risk," said Lance Pressl, president of the Civic Federation, a taxpayer watchdog group. "We'd like to make sure the funds are crash-proof."
The municipal and laborers' funding levels are above the 70% the city claims is a standard national coverage rate.
But experts disagree about whether the 70% standard is adequate.
"Seventy percent is too low," said Henry Bayer, executive director of Council 91 of the American Federation of State, County and Municipal Employees, which represents more than 6,000 city workers. "This is a raid on our members' pensions."
Despite the criticism of Mr. Daley's plan, it appears likely to pass the General Assembly.