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Editorial: A pension reality check for Chicago

Mayor Rahm Emanuel  Budget Director AlexandrHolt spoke about 2014 budget with Sun-Times editorial board Wednesday afternoon. | Rich Hein/Sun-Times

Mayor Rahm Emanuel and Budget Director Alexandra Holt spoke about the 2014 budget with the Sun-Times editorial board Wednesday afternoon. | Rich Hein/Sun-Times

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Updated: November 25, 2013 1:11PM

Mayor Rahm Emanuel made a fine speech before the City Council Wednesday laying out a fiscally responsible budget for 2014.

But the sad truth is that little of what his budget does next year will matter much in the long run.

What matters is 2015, when Chicago’s pension chickens come home to roost.

Emanuel left that stark reality-check for the finale of his speech, where he made a spot-on pronouncement:

“Should Springfield fail to pass pension reform for Chicago soon, we will be right back here in Council early next year to start work on a the city’s 2105 budget — a budget that will either double city property taxes or eliminate the vital services people rely on.”

The 2015 budget must cover a $1.1 billion pension bill, up $617 million from 2014. The leap is mandated by a state law designed to force the city to begin aggressively investing in its grossly under-funded police and fire retirements systems. The firefighters system, which has only 25 percent of the funds it needs, could be out of money within eight years.

Absent reforms to lower pension costs, the city will have to nearly double the city portion of the property tax bill (about 20 percent of the total bill), dramatically cut services or some combination. Emanuel wasn’t kidding when he told the Sun-Times Editorial Board that this will send Chicagoans packing: “I’m not being dramatic. I think people will flee.”

Emanuel has been sounding this alarm bell since he was a candidate for mayor. He went to Springfield nearly two years ago with a detailed proposal for cutting benefits and negotiated a promising reform package with the police sergeant’s union, which unfortunately was roundly rejected.

Until recently Emanuel was loath to talk about a solution that coupled benefit cuts and new revenue, but he wisely made that a centerpiece on Wednesday. We have long believed that a tax increase in Chicago was inevitable, both to be fair to public employees and to support a city anyone would want to call home.

Emanuel wants to delay that full $600 million pension payment, arguing that pension cost-cutting will never happen if new revenue from city property taxes flows first. He has a point, but removing that 2015 deadline will give state legislators one more excuse to fail to act. The state sets the benefit levels for Chicago.

As Emanuel’s Chicago metaphorically burns, state legislators continue to fiddle. They were in Springfield this week trying to finalize a pension cost-cutting package for the state systems, which would be a template for Chicago’s pensions. Legislators must finalize the deal and get it ready for passage when they meet next on Nov. 5. Emanuel could bring the full weight of his persuasive powers to bear to make that happen.

Meanwhile, work will continue on Emanuel’s 2014 budget proposal, a solid blueprint by and large that closes a deficit by relying on greater government efficiencies to free up money, some revenue growth and small fee and tax increases.

The mayor proposes no major tax increases — a good thing because they’ll have to go up soon enough to deal with pensions and because of the weak economy — and instead relies on modest fee increases, as he has the last two years, and a cigarette tax increase.

We worry these hikes and others in previous years will make Chicago increasingly unaffordable, but we appreciate that Emanuel has limited options. And we like that the various fee hikes are meant to deter bad behavior, such as parking in a spot for people with disabilities. Also, Emanuel is channeling that revenue to related investments, such as using the cigarette tax money to pay for health care for kids and revenue from newly installed speed cameras around schools and parks to pay for programs for children — summer jobs, after-school programs and early childhood education. Most of those programs have been hit by federal budget cuts.

The speed cameras are a money grab for a good cause — to reduce speeding and finance valuable programs.

Several alderman fear that the cigarette tax hike, which would give Chicago the nation’s highest combined state and local tax rate, could greatly expand the street-corner black market for “loosies,” or single cigarettes. That’s a legitimate concern that should be weighed against the benefits of gaining needed revenue and discouraging smoking.

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