Chicago Mayor Rahm Emanuel proposed Tuesday a property tax increase totaling $543 million over the next four years to help prop up the $2.9 billion Chicago Policemen's Annuity & Benefit Fund and the $1 billion Chicago Firemen's Annuity & Benefit Fund.
“Our greatest financial challenge today is the exploding cost of our unpaid pensions. It is a big dark cloud that hangs over the rest of our city’s finances,” said Mr. Emanuel in his 2016 budget address to the City Council.
Chicago, which faces roughly $20 billion in unfunded liabilities across its four pension funds, has projected that its required pension contributions will increase to approximately $1.1 billion total (collected in 2016) from $478.3 million the previous year, $550 million of which is attributable to the police and fire funds. A bill to cut the police and fire share to $330 million and extend the deadline for the plans to reach 90% funding to 2055 from 2040 awaits Gov. Bruce Rauner’s approval.
Mr. Emanuel called raising property taxes “a last resort,” but necessary to solve the city’s pension crisis while avoiding deep service cuts.
“Every dollar of the (city property tax increase) is specifically committed to keeping our promise to Chicago’s police and firefighters,” he said.
Meanwhile, oral arguments on lawsuits challenging the constitutionality of benefit cuts for participants in the other two city pension funds — the $5.1 billion Chicago Municipal Employees' Annuity & Benefit Fund and $1.4 billion Chicago Laborers' Annuity & Benefit Fund — are scheduled before the Illinois Supreme Court in November. In July, Cook County Circuit Court Judge Rita M. Novak ruled that pension benefit cuts were unconstitutional, which the city promptly appealed.
In May, ratings agency Moody’s Investors Service downgraded Chicago’s credit rating to junk citing pension concerns.