For years, promises were made and gifts exchanged between city leaders and public employee unions, which is the politically correct term for government employees. Fast forward to 2017 and like Scrooge stealing Christmas, bloated union pension plans are threatening to bankrupt the entire city. In the nation’s list of bloated, underfunded public employee pensions, Chicago’s mounting super-debt sticks out like Meryl Streep dancing on a lounge table in Trump Towers. Financially things have gotten so bad in the trendy, windy city that one of Mayor rahm emanuel’s top aides is all but begging investors for a cash infusion, at interest rates that might make Al Capone blush.
Chicago mayor's aid begs for cash
Wednesday’s bond pitch by Chief Financial Officer Carole Brown to potential loan agents was arranged in desperation to save Chicago, but it went over like a man wearing shades, a hoodie, and sweats loitering in a bank lobby on a sweltering day. The problem is simple. The city doesn’t have nearly enough money to pay city workers the pension benefits they were “promised” -- not nearly enough, as in billions. Mayor Rahm Emanuel seems to be trying to top Detroit when it comes to municipal bankruptcies. For example, nine years: that’s how long Detroit could fund its entire transportation system with the money it will spend on its looming pension bankruptcy settlement.
Similarly, Emanuel’s Chicago pension quagmire needs to borrow $1.16 billion to fund part of Chicago’s general obligation bond issue, and at whatever interest rate he can get; never mind that the city is staring at the next funding cliff in just five years. Talk about leading from behind -- of course, in five years it will likely be a different mayor selling the city’s future to fund bloated pensions.
Chicago accustomed to shady deals between city and unions
Chicago is long accustomed to making shady arrangements between Democrat governors and its infamously crooked mayors, and backroom deals largely funded by the state that swell exponentially. Now, with debt so massive that it challenges accounting firms to figure out how much Chicago owes, Republicans have put the brakes on funding of bloated pensions.
Illinoisans outside of Chicago city limits seem to be tiring of Emanuel and the city’s ever-needy pensioners. They elected Republican governor Bruce Rauner, who campaigned on investigating underfunded pension deficits to see that Chicago’s leaders stop – rather arrogantly -- building deficits into their city budgets.
Emanuel was taken aback by Rauner’s recent decision to veto a house-approved bill that would gift Chicago Public Schools $215 million to bail out its unfunded pension, but the governor is determined to hold Chicago’s big spending city leaders accountable for the state money they spend.
The city and its school system believe the state is responsible for blindly funding their pensions with taxpayer dollars.
The city’s logic is a lot like telling your bank to make the outsized down payment on your auto loan because you wanted a 2017 Maserati GranTurismo, not last year’s model Chevy Volt.
Meanwhile, even as Emanuel is increasing taxes to nearly $900 million a year to cover unfunded pensions, Moody’s rates Chicago’s credit as something akin to “junk." Sadly, the city’s unfunded liability is set to expand for another 15 years, and that's only if the city hits its 7.5 percent investment target, according to Moody's.
"Unless Chicago's economy continues to expand at a robust rate to generate natural growth in other sources, such as sales taxes and fees, additional tax increases will be needed to fund required pension contributions over the long term."
So grab your wallets and purses, Illinoisans, Crook County needs you more than ever -- even if Chicago is not your kind of town.
