(Recasts with passage of bill by Senate, comment from
CHICAGO, April 8 A bill aimed at boosting
funding for two of Chicago's retirement systems breezed through
the Democrat-controlled Illinois House and Senate on Tuesday and
now heads to Governor Pat Quinn, who has not yet taken a
position on the measure.
The legislation, which requires bigger pension contributions
from the city and from its workers, passed the House in a 73-41
vote and Senate in a 31-23 vote after it was amended late on
Monday to remove any mention of new or higher taxes to fund
Chicago's payments to its municipal and laborers' retirement
systems would increase over five years beginning in 2016 under
the legislation. Worker's current contributions of 8.5 percent
of earnings would rise to 11 percent over five years. Instead of
retirees getting an annual 3 percent cost-of-living increase,
the increase would be tied to inflation and skipped in certain
But Mayor Rahm Emanuel's plan to lock in a hike in property
taxes of $50 million a year over five years for pensions met
with resistance in the legislature and from the Democratic
governor, who told reporters on Monday that he could not support
a move to heap more taxes on Chicago residents. His spokeswoman
said on Tuesday that Quinn will review the bill.
Under the final version of the bill, Chicago officials will
have to determine how to come up with money for the higher
Severe pension funding problems have led Moody's Investors
Service to cut Chicago's credit rating four notches since July
to Baa1, and some lawmakers worry that Illinois' biggest city
might follow the path of Detroit and other fiscally distressed
municipalities that have filed for bankruptcy.
"The great international city of Chicago simply cannot go
the way of Detroit or Harrisburg or Vallejo or any other city
that has declared bankruptcy," said State Representative David
Harris, a suburban Chicago Republican. "It is too significant a
city for us to let that happen."
But Senate Republican Leader Christine Radogno argued
against addressing Chicago's pension problems in a piecemeal
fashion, noting that the city soon faces a $600 million
state-mandated funding boost for its two other retirement
systems covering public safety workers.
"It's irresponsible on our part to rush in and take action
when we don't have the full picture," she said during the Senate
debate on the bill.
While proponents said that many of Chicago's public labor
unions supported the bill, a labor coalition, We Are One
Chicago, issued a statement following the Senate vote, urging
Quinn to veto the measure, which it called unconstitutional and
"nothing more than another attempt at pension theft." The state
constitution prohibits the impairment of retirement benefits for
public sector workers.
House Speaker Michael Madigan, a Chicago Democrat who
sponsored the bill, said it was meant to pass constitutional
muster. Senate President John Cullerton said he has his own
constitutional concerns about the bill that will ultimately be
addressed by the state courts.
The bill requires Chicago to pay what it owes annually to
the funds or the state would withhold money due the city. The
bill also gives pension funds the ability to sue the city over
Emanuel's office has warned that the municipal and laborers'
systems face insolvency within nine to 17 years unless changes
are made. The funding shortfall is $8.4 billion for the
municipal system and $1 billion for the laborers system,
according to city documents.
(Reporting by Karen Pierog; Editing by James Dalgleish, Peter
Galloway and Ken Wills)