Budget Update #4: 
Pensions - The Heart of the Crisis
Dear Neighbors, 
Over the past month, as City Council reviews the proposed 2016 budget, I've written three updates to brief you on the process - an  overview of the budget, potential relief for homeowners, and proposed cuts and revenue options.  Now, I 'd like to discuss the heart of the crisis - our city's pension liabilities. 
For years, pension debt has been a cloud threatening to engulf our city.  Since first taking office, I have  fiercely advocated for pension reform .  While leading the first City Council hearing on pensions in October 2012, we called in all the city pension heads to expose the extent of the problem.  I also wrote in Crain's about the pension crisis and held a Town Hall Meeting on pensions.  Public focus and the impending crisis helped set the stage for City Hall to successfully negotiate   fairly modified benefits for the municipal and laborer's pension plans in 2014 .  Under the Mayor's leadership, we won a major pension battle. We have not yet won the pension war because of two key setbacks.  
In May, 2015, the Illinois Supreme Court ruled our State constitution 
guarantees that the current level of government pensions cannot be changed.  I, and many other public servants, disagree with this ruling.
Further, a law passed in Springfield in 2010 (SB 3538, also called Public Act 96-1495), says the City of Chicago is   mandated to raise the property tax levy  so police and fire pension plans reach 90% funding for the current level of benefits.

The Illinois Supreme Court ruling and the funding law are the reason why property tax increases are being proposed this year to cover the $12 Billion underfunding in Chicago police and fire pensions. 
To raise $428 million in pension payments for 2015 and 2016, the Mayor's budget proposes a 7% property tax hike this year (and a total of 12% increases spread over the next four years).  To moderate the impact, the Mayor has proposed to double the homeowner exemption. But the exemption requires the approval of Springfield, and it has little impact on the long term homeowners of our ward who have seen the "paper value" of their homes skyrocket just as they transition to living on a fixed income. 

I strongly believe that if homeowner tax relief is offered in the budget, it must be fair, equitable, and it must reach our long term homeowners. 

In response, this week I introduced an ordinance to protect vulnerable home owners.  Eleven other aldermen joined me in calling for a rebate for those homeowners.  A rebate does not require approval in Springfield nor can it thwarted by a gubernatorial veto.  

While the situation is dire,  I believe the fight for pension reform at the State level will continue.  Modest changes to pensions could lessen the financial burden on our city's taxpayers and allowed the state, city and county to recover economic vitality and still secure the retirements of city workers.  
I entered government to promote a more responsible way of governing. Chicago must meet its obligations, but taxpayers deserve government that works smarter for those who pay for it.  In the coming days, I will continue to fight for fairness in tax relief as well as seek a budget that puts our city on a solid footing. 

As always, I appreciate and welcome your feedback.


Michele Signature

 Michele Smith

 43rd Ward Alderman