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Can Chicago have a bailout too?

The idea of a federal bailout for Detroit’s broken pension funds seems to have gone nowhere with the Obama Administration. So folks here are wondering: can we get a state bailout for Chicago, which has six pension funds with $28 billion in unfunded liabilities?

Is there a way to continue to allow Chicago city workers to retire as early as age 50 with full pensions — and nice cost-of-living allowances? Can we continue to let Chicago fix the salaries on which its teachers’ pensions are based — and somehow arrange for Illinois to pay the pension bill? There is a two-step way.

First, Illinois would guarantee the unfunded pension obligations of the Teachers Retirement System (TRS) — the local K-12 school districts other than Chicago. Today, local communities are primarily responsible for their own school operating expenses. If the TRS pension fund were to run out of money, Peoria’s teachers would look to Peoria.

Under the pension “reform” bill in the Senate that was advanced by Senate President John Cullerton — developed with the unions — the state would contractually guarantee payment of the TRS obligations if (when) TRS goes belly-up. The State would also be contractually committed to fund the TRS pensions annually, at levels determined by actuaries.

(House Speaker Madigan thinks funding of these local pensions should be a local responsibility. The Republicans — traditionally the proponents of local responsibility — have resisted putting this burden on the locals.)

Second, when the Cullerton/union TRS proposal is passed, the next step would be to enact a similar guarantee for Chicago’s school pensions. How could Illinois guarantee the pensions of local teachers in Peoria and Decatur but leave Chicago out? Mayor Emanuel and his legislative allies would never allow that to happen.

Indeed, it’s great political strategy for Chicago Democrats to let Springfield first assume the unfunded debts of TRS — and then arrange for CPS to slip-stream behind. It’s far more persuasive to argue — “Hey, you did it for Peoria,” — than to argue — “Poor, broken Illinois should take on the burden of all local school pensions.” (It also means Mayor Emanuel won’t be the spear-point for pension reform. Why should he wreck his political future?)

How would the state raise the needed funds? Easy — through the proposed new state-wide graduated income tax. Let the rich (well, “relatively rich”) pay for it.

Chicago could continue to set its teachers’ salaries — upon which the pensions are based. Taxpayers throughout the entire state would get to help pay the pension bill. (The same as in Peoria.)

Once the local teachers are handed contractually-binding State pension guarantees, how long will it be before the local police come knocking at the door? And the local firemen? Why not Chicago streets-and-sanitation?

Don’t all public workers deserve equal protection from Illinois?

Let’s not quibble over whether state assumption of local government costs would be fundamentally contrary to our political tradition that local citizens should decide local matters.

Why do this — particularly when Illinois is already broke?

One reason: It’s easier — less politically unpopular — to raise the money from taxpayers state-wide through a graduated income tax than to raise it locally through property taxes.

But the unions and their allies may have forgotten one thing: It won’t be cheap to build and maintain a barbed-wire fence around the entire state of Illinois.

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