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The Chicago City Council on Wednesday passed a property tax increase totaling $543 million over the next four years to help prop up the $2.6 billion Chicago Policemen’s Annuity & Benefit Fund and $1 billion Chicago Firemen’s Annuity & Benefit Fund.
Chicago Mayor Rahm Emanuel proposed the increase in his 2016 budget address to the City Council last month.
“Our greatest financial challenge today is the exploding cost of our unpaid pensions. It is a big dark cloud that hangs over the rest of our city’s finances,” Mr. Emanuel said in his budget address Sept. 22. Mr. Emanuel called raising property taxes “a last resort” but necessary to solve the city’s pension crisis while avoiding deep service cuts.
The 2016 budget, which includes the property tax increase, passed the city council by a 35-15 vote. It takes effect Jan. 1.
Chicago, which faces roughly $20 billion in unfunded liabilities across its four pension funds, has projected that its required pension contributions will increase to about $1.1 billion total (collected in 2016) from $478.3 million the previous year, $550 million of which is attributable to the police and fire pension funds. A bill passed by the General Assembly on May 31 to cut the police and fire share to $330 million and extend the deadline for the pension funds to reach 90% funding to 2055 from 2040 awaits Gov. Bruce Rauner’s approval.
Oral arguments on lawsuits challenging the constitutionality of benefit cuts for participants in the other two city pension funds — the $5.1 billion Chicago Municipal Employees’ Annuity & Benefit Fund and $1.4 billion Chicago Laborers’ Annuity & Benefit Fund — are scheduled before the Illinois Supreme Court on Nov. 17.
Meaghan Kilroy writes for Pensions & Investments, a sister publication of Business Insurance.
The Illinois Senate passed a bill that would modify the way payments are made to the $10.2 billion Chicago Public School Teachers’ Pension & Retirement Fund.