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City: Budget Deficit Will Get Worse Without Pension Reform

By Chuck Sudo in News on Aug 1, 2013 9:50PM

Photo Credit: Ajit Chouhan

The Emanuel administration is sticking with its current “we need pension reform” message across city departments. On Tuesday City Budget Director Alexandra Holt said there will be no hikes in property or sales taxes to close a $338.7 million in next year’s budget and warned that pension obligations could expand the deficit to $1.15 billion in 2016 if the Illinois Legislature can’t reach a compromise on pension reform.

Holt refused to rule out other tax hikes, fee increases and cuts that could include layoffs. Although the city’s payroll had decreased by 20 percent in the past decade, personnel costs have risen by 15 percent. With the city required by state law to make a $600 million contribution to police and firefighters’ pensions in 2015 to stabilize them on the horizon, Holt said the mayor will not throw money into a pension system that is broken. “More taxes don’t solve the problem,” Holt said. “You’ve got to have reform and then, we need to talk about how we pay for it. But if you do them in the reverse, you’ll never get the reform.”

Moody’s, in downgrading Chicago’s credit rating a couple weeks back, said the city has “nearly unlimited” ability to raise property and sales taxes to shore up the budget and should do so to actively address the pension mess everyone keeps passing around like a hot potato. Moody’s also cited "unrelenting public safety demands" for its downgrade but did credit Emanuel for bringing down city expenses. Civic Federation President Laurence Msall joined Holt in calling for “difficult reductions in personnel.” But Fraternal Order of Police President Michael Shields ripped the notion that pension reform should come before funding and said the FOP would fight to ensure the city doesn’t wriggle away from its 2015 obligations.

“Be careful of this mayor when you hear him use the word `reform.’ It usually means that the working man is going to get screwed,” Shields said.