(CBS/AP) – The Illinois House and Senate on Tuesday approved Chicago Mayor Rahm Emanuel’s bailout proposal for two city pension programs that officials say could otherwise be out of money in little more than a decade.
The 73-41 vote on the plan, which hinges on a $750 million property-tax increase, belied lawmaker resistance to it last week. The legislation sponsored by House Speaker Michael Madigan became more palatable to House Republicans after Madigan removed references to the property-tax increase.
The Illinois Senate passed to 31 votes to 23 no votes, with two senators voting present. The bill will now go to Governor Quinn.
The initiative covers two of five Chicago pension plans — those covering 57,000 employees and retirees covered by the municipal workers’ and laborers’ pension accounts, which carry a $9.4 billion shortfall. The tax increase, coupled with increased employee contributions and benefit reductions, would nearly eliminate that deficit during the next 40 years. Officials have yet to address $10 billion in unfunded liability for police and fire retirees and $7 billion for teacher pensions.
Madigan, a Chicago Democrat, likened the proposal to legislatively approved overhauls to other pensions programs in recent years covering the Cook County wastewater treatment system and the city’s park district.
“These are two more local pension systems that acknowledge they have severe financial problems, they’re coming to the Legislature with a solution and asking us to enact it into law,” Madigan said.
Current Chicago pension legislation doesn’t mandate a property tax increase to help close the funding gap but it would allow the City Council to hike the tax. Governor Quinn says he still doesn’t favor that approach.
“Well, I think if they have any kind of pension reform, they need to have revenue to pay for it but there’s many different creative ways to do that,” said Quinn.
But when reporters asked if he would veto the bill, the Governor sidestepped the question.
“I’ll have to look at the whole bill,” said Quinn. You got to read the fine print.”.
With mention of the tax increase out, Republicans could sign on, leaving the distasteful business of a tax hike to the city.
“We cannot ignore the fact that the city of Chicago is the economic engine of the state,” House Republican Leader Jim Durkin of Western Springs said. “You travel anywhere in the world and say you live in the suburbs, people will rave about Chicago and what it has to offer.”
Durkin credited his caucus with yanking the language on the tax hike. He said he told Emanuel he could count on GOP support if it was removed.
Some critics repeated concerns that the city wasn’t dealing with its police and fire accounts, or the one covering teachers, which represent another $17 billion in unfunded liability.
Emanuel’s plan requires not only more money from the city, but from employees. Workers who contributed 8.5 percent of their paychecks now would see that amount increase to 11.5 percent by 2019 and stay there until the system has 90 percent of what it needs to cover promised benefits.
And workers would receive less. The annual cost-of-living adjustments would fall from 3 percent a year, compounded, to a straight benefit of half the rate of inflation, or 3 percent, whichever is less.
The state constitution prohibits the reduction of promised benefits, a claim that is the cornerstone of lawsuits challenging the state pension overhaul the General Assembly and Quinn approved last fall. Madigan would not offer an opinion last week on whether he thought the Chicago plans are constitutional.
In answer to a question Tuesday, Madigan said, “Those who drafted the bill drafted the bill with the clear intent that it would be constitutional.”
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