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updated: 4/9/2014 8:57 AM

Pensions pose latest challenge for Chicago mayor

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  • Chicago Mayor Rahm Emanuel, left, and Los Angeles Mayor Eric Garcetti listen during a March panel discussion about the issues facing the nation's big cities at the University of Chicago.

      Chicago Mayor Rahm Emanuel, left, and Los Angeles Mayor Eric Garcetti listen during a March panel discussion about the issues facing the nation's big cities at the University of Chicago.
    Associated Press

  • Outgoing Mayor Richard M. Daley, left, and Mayor-elect Rahm Emanuel share a moment at the April 7, 2011, White Sox game at U.S. Cellular Field in Chicago. Emanuel is dealing with the nation's worst-funded city pension systems, a festering problem he inherited from Daley.

      Outgoing Mayor Richard M. Daley, left, and Mayor-elect Rahm Emanuel share a moment at the April 7, 2011, White Sox game at U.S. Cellular Field in Chicago. Emanuel is dealing with the nation's worst-funded city pension systems, a festering problem he inherited from Daley.
    Associated Press

 
Associated Press

Rahm Emanuel has been a force in politics -- the mastermind behind a Democratic takeover of Congress, dealmaker in two White Houses and now the hard-charging mayor intent on fixing what ails the nation's third-largest city, no matter whom he ticks off in the process.

But less than a year before asking voters to give him a second 4-year term, the man once nicknamed "Rahmbo" for his fierce political maneuvering has now come face to face with a mess that could undermine Chicago's reputation as an efficient metropolis and derail its ambitions to become a high-tech business mecca: the worst public pension crisis of any major U.S. city.

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Emanuel last week announced his first concrete proposal to bail out the city's drastically underfunded employee retirement systems, a festering problem inherited from his predecessor, Richard M. Daley. The plan, designed to cut Chicago's nearly $20 billion shortfall in half by reducing worker benefits and raising property taxes, would address only half the problem, but even this first attempt was met with fierce resistance from unions and taxpayer groups -- and little enthusiasm from fellow Democrats he needs to get it approved.

Emanuel's supporters say that after decades of inaction by Chicago and Illinois politicians, the former White House chief of staff is finally dealing with the pain necessary to fix the problem. The mayor says it's the only answer for keeping the system out of insolvency and avoiding massive cuts in public services and a far larger tax hike.

"I said (during the 2011 mayoral campaign) that Rahm is the only one who has the intestinal fortitude to do what needs to be done," said Bernie Hansen, a former Chicago alderman for nearly two decades. "He's ruthless at times, but sometimes you have to be."

But Emanuel's critics -- including a union leader who called the plan "criminal" -- say it's just the latest affront from City Hall. During his tenure, Chicago already has shuttered about 50 neighborhood schools to cut costs.

Other cities have run into pension problems, particularly during the recession, that required cutbacks and tough negotiations. Providence, R.I., was on the brink of bankruptcy when its mayor got unions and retirees to agree to a cut in benefits. But no major city compares to Chicago, where pension systems have just 35 percent of the money needed to pay benefits. The next worst-funded major city, Philadelphia, has about 48 percent.

And there are questions about whether the 54-year-old Emanuel, known for being quick-talking and occasionally brusque, has the temperament and relationships to build a consensus.

Already, there is talk in Chicago's black community, which would be hit hard by the cuts, of recruiting a challenger to run against the mayor, who currently has no announced opponent.

"When ordinary people are talking about this every day, there's no way they're going to let him run unopposed," said Delmarie Cobb, a veteran political consultant who worked on the Rev. Jesse Jackson's presidential bid and other federal campaigns.

Emanuel declined to comment for this story, but he told reporters after announcing the plan last week that he is focused on doing what's best for the city, not his own career.

"The voters did not elect me to think about my political future. They elected me to think about Chicago's future," Emanuel said.

Without relief, he said, the city's pension payment next year could be about $1 billion -- an increase roughly equal to the annual cost of having 4,300 police officers on the street or raising property taxes by 150 percent.

The huge shortfall mounted during the 22 years of the Daley administration, which did not make large enough contributions to the retirement funds for city laborers, police, firefighters and teachers. Daley created a task force to study the problem, but his administration focused mostly on modernizing and beautifying "the city that works," with parks, public art and cultural attractions. His supporters insist he saved Chicago from the woeful fate of other Rust Belt cities.

By the time the recession strained the city budget, the problem was too big to overlook. Even Detroit, which filed for bankruptcy last year, has healthier pension funds.

Making a solution especially tricky, a state law requires the Illinois Legislature to approve any changes to city pensions. Already, lawmakers have gotten cold feet about simultaneously increasing taxes and angering powerful labor unions.

Among the opponents is Karen Lewis, the president of the Chicago Teachers Union who presided over the two-week strike in 2012 and labeled Emanuel "the murder mayor" for his plan to close schools and send kids across gang lines to new ones.

Lewis calls the pension plan "criminal" and "just awful," saying it will hit school employees -- who don't receive Social Security and are predominantly women of color -- with both a loss of benefits and, for those who own homes, a property tax increase they can't afford to pay. She said Emanuel could have easily solved the problem by tapping Chicago's wealthy business community -- some of whom are friends who have helped the mayor amass a more than $6 million campaign fund.

"But they don't ever want to go there. For some reason, those people are sacrosanct," she said. "They just want us all working until we die."

Perhaps the only thing more damaging for both Chicago and the mayor than the plan going through is if it doesn't, said former Chicago Alderman Dick Simpson.

"The employees and the unions already are mad at you. And then everyone else will be mad at you because you didn't fix it and now their taxes are going up," Simpson said. "If it doesn't pass, you get the worst of both worlds."

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