Gov. Bruce Rauner’s latest offer to solve the state and local pension crisis appears to give Mayor Rahm Emanuel a healthy chunk of what he wants — but not all of it.
It includes an offer to lift the financial hammer hanging over Chicago taxpayers: a state-mandated, $550 million payment due in December to shore up police and fire pension funds.
The Democratic-controlled Illinois House and Senate have already approved the bill, giving Chicago 15 more years to ramp up to 90 percent funding levels for the two funds.
Chicago taxpayers would still be on the hook for $619 million in payments to the two funds next year — more than double the current payment. But that’s still $219 million less than the city would have been forced to pay and an $843 million break over the next five years.
Rauner’s offer also includes the elusive, city-owned Chicago casino with all of the revenues devoted exclusively to shoring up police and fire pensions. That could minimize the need for a massive, post-election property tax increase in Chicago.
One week after Emanuel used a toxic mix of borrowing and budget cuts to make a $634 million payment to the Chicago Teachers Pension Fund, Rauner is offering a partial solution to the $9.5 billion teacher pension crisis.
He’s offering to pick up the “normal cost” of teacher pensions and help CPS with the hefty price tag for “defraying health insurance contributions,” but only for fiscal years 2016 and 2017.
The deal is contingent on Chicago teachers accepting the equivalent of a 7 percent pay cut by absorbing the “pension pick-up” that CPS agreed to make years ago in lieu of a pay raise. Teachers currently contribute just 2 percent to their own pensions.
On Wednesday, CTU Vice President Jesse Sharkey called that proposal “a non-starter.” Furthermore, he said, it’s not what the Chicago Board of Education has asked for so far at the bargaining table where the parties continue to hash out a new contract.
“We’re already talking to the board about working without a raise, and if they’re [now] saying, ‘No, no, no, you need to work with a 7 percent pay cut,’ that’s a proposal that’s going to provoke a fight,” Sharkey said. “They are literally talking about taking the working conditions and the learning conditions of this city and trashing them at the same time.”
“Rauner, the last time I checked, doesn’t have enough votes to vote this though any legislative body,” Sharkey continued. “You have to say that this is what Rauner set out to do, Rauner wanted to shake things up and provoke a crisis in state government to get through a turnaround agenda.
“So congratulations, you’ve got your crisis,” he said.
The governor’s plan also includes the bankruptcy protection that he’s been pushing as the ultimate solution for Chicago Public Schools and Emanuel has, so far, resisted.
City Hall sources said neither Emanuel nor his staff were given a heads-up before the governor’s news conference.
Late Wednesday, top mayoral aides had not yet read the 500-page bill. But City Hall sources said it appears that Rauner took pension reform proposals made by Emanuel, Senate President John Cullerton (D-Chicago) and County Board President Toni Preckwinkle and “rolled them into” some of the governor’s own reforms.
“On the plus side, it does have elements of what the mayor has laid out. But it’s hard to understand what the intention is,” said a mayoral confidant, who asked to remain anonymous. “When you throw in things like bankruptcy, it becomes harder to get this passed.”
Does City Hall believe the governor’s true intention is to isolate House Speaker Mike Madigan?
“That seems like part of their strategy,” the Emanuel confidant said.
With Rauner’s plan, the question is, what happens after 2017?
What’s missing from it is any mention of rewriting the state school aid formula in a way that recognizes the special burden Chicago bears for educating so many students who don’t speak English, live in poverty or both.
Last week, Emanuel offered to raise Chicago property taxes by as much as $225 million provided it’s part of an “all-in” bargain where teachers absorb their entire, 9 percent pension payment and the state reimburses CPS for “normal” pension costs.
In fact, the mayor made two offers. The first, he called “simple and direct.” Create one “uniform pension system” for all teachers and taxpayers across the state and stop treating Chicagoans like “second-class citizens.”
But if state lawmakers don’t like that idea, Emanuel touted what he called an “all-in” approach.
That calls for teachers to make the full 9 percent pension payment. It would require the state to “rewrite” the school funding formula in a way that “recognizes the special burden” Chicago bears. And it would require the City Council to reinstate the property tax increase for teacher pensions to the tune of $175 million.
That’s a $225 million increase if, as expected, Emanuel also takes advantage of a $50 million school construction levy. It would cost the owner of a home valued at $250,000 roughly $225 more each year.
CPS has been empowered to impose a “capital improvement tax” for more than 20 years but “never activated” it. Emanuel is expected to take advantage of it.
As part of the “grand bargain,” the mayor even offered to forfeit or reduce CPS block grants, but only if the school aid formula is rewritten in a way that doesn’t penalize Chicago.
“I don’t easily go to taxpayers. But part of the solution is you’re willing to give up things that you don’t support in an effort to get other things that you think are essential to the solution,” the mayor said then of his offer to seek a massive increase in property taxes.
On Wednesday, Emanuel’s communications director Kelley Quinn issued a carefully worded statement that makes it clear City Hall considers Rauner’s offer a step forward toward steering Chicago away from the fiscal cliff.
“We have not had an opportunity to review the proposed legislation; however, legislative leaders and the governor were briefed on Chicago’s agenda early in the legislative session,” she wrote.
“While we are encouraged that the governor has incorporated elements of both the City and CPS’ agenda, some of these items have already been adopted by the General Assembly, including pensions for both police and fire.”
For weeks, Emanuel has been assuring aldermen behind closed doors that he had an agreement from Rauner, the mayor’s longtime friend and former business associate, to sign the police and fire pension reform bill.
Rauner’s latest plan goes beyond that in resolving the combined, $30 billion pension crisis that has saddled Chicago and its public schools with junk bond ratings that have already cost taxpayers tens of millions of dollars in penalties and higher interest rates.
The next move in this high-stakes political chess game is up to Speaker Madigan, D-Chicago. Once again, Emanuel appears to be at the mercy of a powerful Democratic politician who has been the ballgame in Springfield for decades.
Contributing: Lauren FitzPatrick