In an early morning keynote speech to municipal bond analysts Wednesday, Mayor Rahm Emanuel urged the crowd to consider a rosier picture for Chicago’s fiscal future, touting improved tourism, corporate relocation, and graduation rates, rather than solutions to bleak forecasts for the city’s pension funds and public schools. He accused the Illinois Supreme Court of putting a “straight jacket” around the city when it ruled earlier this year that his plan to reform the city’s Municipal and Labor funds was unconstitutional.
“I don’t believe how the Supreme Court interpreted the constitution was right. I think that they put, in my view, a straight jacket around us,” Mayor Emanuel said to the room of about 200 members of the National Federation of Municipal Analysts meeting at the Westin Michigan Avenue Hotel. It was one of his first official public remarks on that decision since the court’s ruling in March. The Mayor’s pension plan would have reduced annuity benefits for public employees, then ramp up pension payments and put both funds on a path toward financial stability.
Mayor Emanuel explained yesterday that the city is back at the table with the trustees of the labor and municipal funds “working through that issue” to find new revenue to keep the retirement funds from insolvency.
But his remarks fell short of explaining how he plans to rebound from that setback. The Civic Federation projects insolvency in muni and labor funds in 10 to 13 years. According to the city’s 2015 Annual Financial Analysis, the municipal workers’ pension was only 42 percent funded, and the laborers only 64 percent funded at the end of 2014 (p. 87).
Mayor Emanuel expressed confidence that Gov. Bruce Rauner will sign a bill, SB777, to amend the funding timeline for the city’s police and fire pension funds. Gov. Rauner has said publicly that he will not sign pension reform without adding on components of his Turnaround Agenda. The city has already tapped a $220 million line of credit to meet a state-mandated March 1 deadline to have money available to make its pension payments.
The Mayor did not outline solutions for how to fix crumbling finances at Chicago Public Schools either, but instead provided recent CPS talking points that Springfield’s funding formula is one of the worst in the nation and reform is needed. CPS has disclosed to aldermen this week that it will only have $24 million cash on hand by the end of June and needs a line of credit for the next fiscal year.
“We have met every issue head on,” Mayor Emanuel announced towards the end of his speech that was peppered with accomplishments that he tends to tout at these types of events: record tourism and growing corporate relocations; expanding pre-k and business-oriented curricula at community colleges; and having the most diverse economy in the country (he noted no industry makes up more than 13% of the city’s economy).
“I know you all want to talk about public finances, and I am going to talk about them,” he joked after highlighting those statistics. “But I want you to understand how we approach it in the City of Chicago, which is in a larger context of the economy. And that the fiscal condition of the City of Chicago needs to be part of an overall strategy. Not just fiscal over here, and the economy, or the health of Chicago’s economy, over here.”
Repeatedly reminding the crowd that he inherited the city’s poor fiscal position, Emanuel referenced the start of his first term in 2011. As a newly-elected mayor, he said he commissioned several independent reports on the city’s finances. He said he was faced with what he described as two reckless options for a city rebounding from the Great Recession: dramatically raise taxes or cut services.
“The most reckless strategy would have been to raise taxes without reforming, especially for people just emerging out of that recession,” he said. “Doesn’t mean we weren’t going to find additional revenue, but we weren’t just going to be willy-nilly about raising taxes.”
Emanuel said he also rejected the “other side of the ledger”, cutting services, which he called “crazy” and “reckless”, because of the number of people dependent on those city-funded services.
“We have not wavered. We have not wobbled in that effort. I don’t think denial is a long term strategy,” he concluded, attempting to make a joke about denial being a river in Egypt. Hardly anyone laughed.