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Lawmakers fear blame for Chicago pension tax hike

Published: Thursday, April 3, 2014 9:27 p.m. CDT • Updated: Thursday, April 3, 2014 9:29 p.m. CDT

SPRINGFIELD – A fast-tracked plan to overhaul two Chicago city-pension programs slowed in the Illinois House Thursday, as nervous lawmakers said they fear backlash for a massive property-tax increase even if they don't directly approve it.

House Speaker Michael Madigan wanted quick House approval for Mayor Rahm Emanuel's plan after the mayor said he has agreement with major unions covering 57,000 workers and retirees to reduce by half a $20 billion pension debt over 40 years. But half the cost for municipal workers' and laborers' pensions would be covered by a five-year, $750 million property tax hike that the Chicago city council must approve.

How that features in necessary legislation has some in the Capitol jittery.

"Legislators are concerned about wearing the jacket for that property tax increase," said Rep. Elaine Nekritz, a Northbrook Democrat and pension expert.

Some say Chicago, a home-rule city not subject to many state laws, often wants to be left alone by the Legislature – so city officials should take full responsibility for the taxes. Others are wondering where the unions in favor of the changes are and why the city isn't dealing with all its pension accounts at once.

The timing isn't the best, either, coming just a week after Gov. Pat Quinn made property-tax relief a cornerstone of his state budget plan. The Democrat wouldn't stake a position on the pension measure Thursday but reiterated his desire to reduce the property tax burden.

Municipal pension funds are created and governed by state law, so the General Assembly must approve changes. The Chicago plan would increase employee contributions and reduce benefits to retirees. But lawmakers don't want their fingerprints on any city council vote to raise taxes.

"A lot of us would like to see the aldermen take that vote before we do ours ... ," said Chicago Democratic Rep. Kenneth Dunkin, leader of the Legislative Black Caucus. "We're starting down here, but there are no assurances the city of Chicago, the aldermen, will follow suit."

Steve Brown, a spokesman for Madigan, D-Chicago, said Democrats, who hold a supermajority of 71 seats, are still counting votes on the roll call, but he said he didn't know where it stood.

The original bill required the city to levy the required revenue to meet its pension obligations, but Madigan said he plans to amend the initiative to give the city permission to raise the revenue, not require it. There's the rub. Brown said Madigan wants the language in there so that in the future, the money isn't diverted away from paying for pensions. But legislators fear that makes them culpable.

"There's really no reason for any mention of real estate taxes in that pension bill ... ," said Rep. Ron Sandack, a Downers Grove Republican. "For me, I'm not going to vote for a pension bill that has any mention of even a permissive, suggestion of raising taxes. That's for them."

Quinn is making property tax relief a key part of his budget plan, which relies on keeping an income-tax increase that was adopted in 2011 as temporary. In return, the governor wants to offer a $500 property tax refund.

He told reporters Thursday, "We have to reduce our reliance on property taxes," declining to offer a position on the pension bill because it's not advanced legislatively.

Emanuel said he had agreement from 31 labor unions involved, but representatives from three – including the American Federation of State, County and Municipal Employees and the Chicago Teachers Union – oppose it. Those are powerful voices, said Nekritz, and lawmakers haven't been lobbied by the groups Emanuel says are in favor.

"We're not hearing anything from them to say, 'Yes, do this'... ," Nekritz said. "That sends a message."

Others question why Chicago isn't dealing with all its pension problems at once. About $10 billion of the debt is in the police and fire pension funds, plus about $8 billion in unfunded liability for a separate account for teachers.

Fire and police pension problems don't end in Chicago. Mayors from across Illinois, part of a group called Pension Fairness for Illinois Communities, put out a statement Thursday asking legislators to make changes in their fire and police funds to help them avoid cuts in city services.

"The cost of pensions is not just a Chicago problem, but a serious pension funding crisis that is affecting communities throughout Illinois," Aurora Mayor Tom Weisner said in the statement.

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The bill is SB1922.

Online: http://www.ilga.gov

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Associated Press writer Sophia Tareen contributed from Chicago.

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Contact John O'Connor at https://twitter.com/apoconnor

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