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Quinn: State revenue sharing could fix Chicago pensions

Illinois Governor PQuinn speaks City Club Chicago. | Richard A. Chapman/Sun-Times

Illinois Governor Pat Quinn speaks to the City Club of Chicago. | Richard A. Chapman/Sun-Times

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Updated: May 30, 2014 6:18AM

Gov. Pat Quinn on Monday offered up opening the state spigot to local municipalities — including Chicago— as a way to help alleviate pending pension crises.

Quinn said he was open to diverting a greater share of state income tax revenue to local municipalities.

Following remarks at a City Club of Chicago luncheon, Quinn never directly tied the proposal to Chicago’s looming pension mess, but the elephant was clearly in the room.

Quinn and Chicago Mayor Rahm Emanuel have butted heads on the issue over the last several weeks, with Quinn forcing Emanuel to strip property tax language from a state bill to give the city greater authority over public employee union contracts. The bill, which is now silent on property taxes, was passed and awaits Quinn. Quinn would not say on Monday whether he would veto it or sign it.

Quinn said a plan to designate more state income tax revenue toward local governments would work through his budget proposal, which called for an extension of an income tax hike from 3.5 percent to 5 percent — as well as a $500 property tax rebate.

“I believe in that. I think that’s a good way to help local units of government and the school districts to some extent reduce their reliance on property taxes,” Quinn said. “That has to be one of our foremost missions in Illinois. The property tax collects more money every year than the income tax and sales tax combined. I want to reduce our property taxes.”

Quinn’s office said there is no proposal to further increase the income tax, nor did it have a proposed revenue stream to pay for any increase in money that would go to local governments.

It would likely require cuts elsewhere in the budget to increase local governments’ share of state income tax revenue.

“I am very open to discussing with our local units of government a way to share some of the income tax revenue beyond what we are today in order to help them with their challenges,” Quinn said. “At the same time our foremost challenge is to invest in our education in a fair way that doesn’t starve our education, raise local property taxes.”

Emanuel has proposed a $250 million property tax hike as a way to shore up two of four local pension funds. Quinn has made clear he does not support raising property taxes.

“We should not rely on the regressive property tax system. We’re over-relying on that,” Quinn said.

Hours after Quinn’s offer, City Hall issued a carefully worded statement that welcomed the windfall to cities, but summarily rejected it as an alternative to Emanuel’s massive property tax increase.

“Mayor Emanuel would welcome this reversal in policy to restore full funding of the income tax to local governments. Regardless, it is imperative that Governor Quinn sign the pension reform legislation immediately to secure the retirement of our workforce and a bright future for all of Chicago,” the statement said.

Emanuel’s property tax proposal became a political hot potato for Quinn, who in his budget address had already promised Illinois taxpayers property tax relief. Quinn immediately told Emanuel “no can do” on a property tax hike through the state Legislature, forcing Emanuel to take out that language. Aldermen have the authority to tax on their own, but have been cool to the idea.

Last week, Quinn’s November opponent, Bruce Rauner, financed tens of thousands of automated calls to Chicago residents saying that Quinn should veto the bill that could set the stage for an Emanuel property tax hike.

Rauner called it a “no-brainer.”

Ald. Pat O’Connor (40th), Mayor Rahm Emanuel’s City Council floor leader, said he views Quinn’s offer to increase the share of state income tax revenue earmarked for municipalities as a “symbol that he’s really working towards trying to come to a place that helps Chicago.”

That’s even though O’Connor does not consider it an alternative to a $250 million property tax increase that would satisfy Wall Street rating agencies.

“It is a readily identifiable amount that, in any given year, can be changed or modified at the desire of the state Legislature or the governor,” O’Connor said. “I don’t know that a rating agency would say that is a reliable source for funding going forward to meet the requirements we have for the pension problem. ... You are levying an amount certain in the property tax. That [income tax] could be less and fluctuate with the economy, but also fluctuate in that the state could change it on a regular basis.”

O’Connor acknowledged that Quinn’s offer would have given Chicago a $135 million windfall this year alone.

“It’s huge money. There’s no doubt. If, in fact, that were to be raised on a regular basis, the effect would, in part, be what the governor is asking for: less of a reliance on any property tax,” the alderman said. “What might be helpful is if they would perhaps just do what they can do in their own area of influence and let the other make the best judgment for their area of influence. We’d get to a better place much quicker.”

O’Connor said the governor should still sign the legislation awaiting him.

“I’m sure hoping he signs it. It’s very important for the future of Chicago. In the end, he has to get this thing done because the city will really be in a difficult spot if it doesn’t get done,” O’Connor said.

Quinn’s proposal resembles portions of a proposal offered up by Ald. Brendan Reilly (42nd) last week as an alternative to Emanuel’s property tax hike proposal.

Reilly proposed using more designated state income tax revenue as well as tapping tax increment financing.

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