[dropcap]C[/dropcap]hicago’s taxes are probably going to go up next year. It’s either going to be a sales tax increase, a property tax increase or both. It’s the only way to address the city’s unfunded police and fire pension liability, not to mention the lack of state funding to the city if Governor Bruce Rauner gets his budget passed.
During Monday’s debate Mayor Rahm Emanuel made the case for himself as the only candidate with the financial knowhow to fix the city’s problems. The mayor may have been an astute investment banker back in the late 1990’s, making over $18 million in about two-and-a-half years by turning many of his political contacts into financial clients. Yet, for all his success managing his own finances, the mayor’s first term in office resulted in Moody’s Investors Service downgrading the city’s debt rating earlier this month because of its overwhelming pension burden.
Moody’s estimates the city has $32 billion in unfunded pension liability, eight times the city’s operating revenue. That’s on top of the city’s $300 million structural deficit.
“[Cook County Commissioner Jesus “Chuy” Garcia] has laid out a commission, not a plan. I just gave a specific approach,” said Emanuel. “There’s a fundamental difference between a commission and a real plan.”
Garcia’s budget, released last Friday, is very light on specifics to address the city’s pension problems. It’s mostly concerned with restructuring of city’s budget process to be more transparent.
“There are many things that need to be on the table. However, you cannot move forward until you show Chicagoans where the tax dollars are going,” Garcia said.
Yet Emanuel saying he has a solid plan is misleading, as he’s gambling on the Illinois Supreme Court saying the state’s recent pension overhaul package is constitutional. That’s why he kicked the $550 million owed to the police and fire pensions to the 2016 budget. It made the mayor’s 2015 budget look more solid than it actually is. And let’s not forget Rauner’s 2016 budget proposal creates a 3 percent cut in money the state pays to Chicago if it’s passed.
“[Emanuel] promised four years ago to put Chicago’s fiscal house in order. We’re in a financial free-fall. The city has been downgraded,” said Garcia. “And he claims that he has the financial sophistication to deal with the city’s problems? Not so.”
But because they don’t want to lose voters neither Emanuel nor Garcia will directly address the elephant in the room: Next year the mayor will need increase taxes to pay Chicago’s bills.