October 27, 2015 / 9:27 PM / 5 years ago

Chicago budget heads to final vote despite pension uncertainties

CHICAGO (Reuters) - Chicago Mayor Rahm Emanuel’s proposed fiscal 2016 budget and historic property tax increase dedicated to paying pensions for police and firefighters is expected to win approval on Wednesday from the city council even though the spending plan faces uncertainties.

The mayor’s $7.8 billion budget for the fiscal year that begins Jan. 1 could be short $102 million or $220 million depending on the actions of the Illinois Legislature, Governor Bruce Rauner and the state’s supreme court, according to Ralph Martire, executive director of the Chicago-based Center for Tax and Budget Accountability. This is despite a $543 million property tax increase phased in over four years.

Martire added the “bitter pill” of a tax increase is necessary to avoid severe cuts in city services.

“But it’s not enough,” he said. “The city is going to need more money.”

Emanuel linked the tax hike to legislation reducing the city’s contribution to its public safety retirement systems initially by $220 million. That bill passed the Democratic-controlled House and Senate, but is on hold due to an ongoing budget battle between Democratic lawmakers who control the legislature and the Republican governor, who has been critical of that measure.

Molly Poppe, a spokeswoman for the mayor’s office, acknowledged taxpayers would be on the hook for the additional $220 million if the bill fails to become law, leaving the city subject to a 2010 law that mandates an immediate $550 million increase in contributions.

Martire estimated the $220 million shortfall could be pared to $102 million if the Illinois Supreme Court throws out a 2014 state law that required Chicago to increase payments to its municipal and laborers’ retirement funds.

Chicago will defend the law against challenges from city unions and retirees before the high court on Nov. 17.

In the event Chicago loses in court and is unable to reduce its police and fire pension payments, “the city would continue to work on responsible pension reforms that protect taxpayers, while also funding the city’s obligation to all four pensions,” Poppe said.

The mayor, who is also seeking a law shielding lower-valued residential property from the tax hike, has continued to express optimism that his wish list in the state capital of Springfield will be fulfilled even as the political stalemate has left Illinois without a budget nearly five months into fiscal 2016.

“Springfield will get its work done. I’m confident eventually they will no longer have this standoff,” Emanuel told reporters last week.

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