(Adds release of plan details by mayor's office, union
CHICAGO, April 1 Chicago Mayor Rahm Emanuel
proposed raising property taxes and reducing retirement benefits
for some city workers in order to ease a severe pension funding
problem, according to details of the plan released by his office
Under the plan, the city would collect $250 million more in
property taxes over five years while workers' current 8.5
percent contributions to the city's municipal and laborers
retirement systems would rise an additional 2.5 percent over
five years. Annual 3 percent compounded cost-of-living pension
increases would also be tied to inflation and skipped in certain
In addition, the city would tap separate funds for its
airports and utilities to cover pension funding increases for
workers in those departments.
Chicago warned that the two systems face insolvency within
nine to 17 years. The funding shortfall is $8.4 billion for the
municipal system and $1 billion for the laborers system,
according to city documents.
A coalition of public labor unions, We Are One Chicago,
blasted the plan as unfair to current and retired workers.
"The city's proposal is an unconstitutional approach that
makes onerous cuts to the pension benefits of nearly 50,000
active and retired public servants," the group said in a
Recently enacted pension changes for Illinois teachers and
state workers are being challenged in court on the grounds that
the state constitution prohibits any impairment of retirement
benefits for public sector workers.
Because pensions are governed by state law, Chicago will
seek legislative approval for the plan.
"The plan strikes the right balance of reform and revenue
and serves as an honest framework in which everybody gives
something, so that no one has to give everything," Emanuel's
office said in a summary of the plan.
Last month, Moody's Investors Service dropped Chicago's
credit rating one notch to Baa1, citing a massive and growing
pension liability that remains a threat to the city's fiscal
solvency. Prior to that downgrade, Moody's slashed Chicago's
rating three notches in July.
(Reporting By Karen Pierog; Editing by Dan Grebler)