(Adds comments from governor, mayor, unions, background)
CHICAGO, June 9 (Reuters) - 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 retirement systems.
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 bill.
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 businesses.
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 Steve Orlofsky)