(Adds comments from governor, mayor, unions, background)
CHICAGO, June 9 Illinois Governor Pat Quinn on
Monday signed into law a bill aimed at boosting funding for two
of Chicago's public pension funds, its municipal and laborers
The Democratic governor said he was swayed to approve the
bill after language requiring the city to raise property taxes
for pension payments was removed from an earlier version of the
The new law requires bigger pension contributions from
Chicago and from its workers, but it leaves it up to the city to
determine how to come up with the money.
In a letter accompanying the bill signing, Quinn urged the
city to rule out a property tax increase on homeowners and
Chicago Mayor Rahm Emanuel said that the bill, crafted with
the cooperation of many of the city's unions, marked a big step
in addressing the city's pension crisis.
"This balanced plan relies on efficiencies and savings as
part of a long-term funding solution, and I intend to work with
city council in the coming months to find alternative options to
replace property taxes as the source of the city's first pension
payment," the mayor said in a statement.
Chicago's payments to its municipal and laborers' systems
would increase over five years beginning in 2016. Workers'
current contributions of 8.5 percent of earnings would rise to
11 percent over five years. Instead of receiving an annual 3
percent cost-of-living hike, the bulk of retirees would get
increases tied to inflation and skipped in certain years.
Some city unions called the reforms unfair and
unconstitutional and said they will be preparing a lawsuit.
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.
Severe pension funding problems has led Moody's Investors
Service to cut Chicago's credit rating four notches to Baa1
since July 2013.
(Reporting By Karen Pierog; Editing by Meredith Mazzilli and