Chicago pension overhaul could reverberate in 2015 election

A new law overhauling two of Chicago's pension systems is already November election fodder for Gov. Pat Quinn's Republican challenger, but the issue could also ripple into Mayor Rahm Emanuel's 2015 re-election bid.

Quinn, a Chicago Democrat, signed the plan into law Monday. Addressing municipal employee and laborer pensions, the law seeks to eliminate the $9.4 billion shortfall in those funds by cutting benefits and increasing contributions. But two key questions persist: how Chicago will make up needed revenues, and whether the law is constitutional - something that could affect how other Illinois municipalities solve their pension problems.

The issue comes as Quinn faces a challenge from businessman Bruce Rauner, who accused Quinn of implicitly signing off on a property tax increase. An earlier draft of the law called for a property tax hike, but Quinn urged against it and Emanuel later agreed to take the idea off the table for a year.

Still, no clear alternatives have emerged, and the question is likely to resurface when Emanuel is up for re-election.

"A tax increase almost surely is going to be hanging over his head," said Chicago political consultant Don Rose. "A property tax increase would be almost a cinch to knock him down (with)."

It's too early to speculate about Emanuel's re-election bid, campaign spokesman Pete Giangreco said. No one has publicly stepped forward yet to challenge the first-term mayor.

"There's going to be plenty of time for politics," Giangreco said. "The mayor is focused on solving big problems and moving the city forward."

City council members have balked at the idea of a property tax increase, but some said there were alternatives.

Alderman Will Burns said state legislators could increase the share municipalities get from income tax revenues. Alderman Pat O'Connor, Emanuel's floor leader, said another idea could involve be working with other cities.

Chicago has the worst-funded retirement systems of any major American city. It has yet to address police and fire department pensions, an issue that has dogged mayors from Rockford to Peoria who say rising pension costs are crowding out funding for services and they're coping with cutbacks.

Quinn's administration said Tuesday that cities could look at the Chicago law for ideas.

"While there isn't a one-size-fits-all approach, we certainly encourage cities and counties to examine the reform components of this bill," Quinn spokesman Grant Klinzman said in a statement. "Each city or county needs to adopt a policy that best fits their needs."

Illinois has the worst-funded pension systems of any state. For years, lawmakers created shortfalls by skipping or shorting payments. Last year, lawmakers approved a plan that cuts benefits to eliminate the state's roughly $100 billion pension debt, but it's undergoing legal challenges by unions.

A group of unions has also threatened to sue over the new Chicago law, claiming it unfairly cuts benefits and disproportionately affects minorities, women and low-income residents.

Signing the Chicago law presents an election-year quandary for Quinn, who's seeking a second full term.

He's rejected the idea of a property tax, having advocated for a property tax refund this year. But he's supported other taxes. Last week, he signed legislation authorizing the city to increase its telephone tax by 56 percent, partly as a possible way to avoid a property tax increase. At the same time, he's pushing for an extension of the state's 2011 temporary income tax increase as a way to avoid budget cuts to schools and other areas.

Rauner, a venture capitalist from Chicago seeking office for the first time, claims Quinn wants a property tax increase, which Quinn has denied. Rauner said he would have vetoed the Chicago law.

"Pat Quinn likes to raise taxes and left homeowners holding the bag again," he said in a statement. "This should have been a no-brainer."

Quinn's campaign said the move helped put Chicago on track.

"The governor signed a bill that saves taxpayers billions of dollars. He stopped a property tax increase," said Quinn campaign spokeswoman Brooke Anderson. "Rauner's vowed to veto a bill that would have guaranteed the mother of all tax increases."