There’s an alternative to Rahm’s proposed $750M in property tax increases

Chicago Mayor Rahm Emanuel is calling for a $750 million property tax increase on Chicago residents over the next five years in his recent pension proposal. And his proposed “reform” plan covers only the city’s municipal and laborers pension funds. That doesn’t include whatever tax increases he’s got planned to fund the pensions of teachers,...

Chicago Mayor Rahm Emanuel is calling for a $750 million property tax increase on Chicago residents over the next five years in his recent pension proposal. And his proposed “reform” plan covers only the city’s municipal and laborers pension funds. That doesn’t include whatever tax increases he’s got planned to fund the pensions of teachers, police, fire, and transit and park employees.

If Emanuel uses his plan as a blueprint for the other city plans, taxpayers will be paying billions more for pensions in the coming years.

But Chicago doesn’t need to continue down the path of higher taxes and cuts in core services to pay for pensions. That’s why the Illinois Policy Institute released an alternative path for the city.

Unlike the mayor’s plan, our plan doesn’t raise taxes. Instead, it immediately cuts the city’s $29 billion in unfunded pension liabilities in half. And the results of the plan have been estimated by an actuary.

The lynchpin of our city reform package is a hybrid retirement plan contains two key elements – a self-managed plan and a Social Security-like benefit. This plan gives workers the opportunity to participate in long-term market returns but also provides them with the stability offered by fixed monthly benefits.

Many argue the self-managed component of the plan isn’t politically viable in Illinois – especially not in Chicago.

But the power of the plan lies in the results and the numbers.

Chicago could have avoided many of the crises it faces today if it had followed the Illinois Policy Institute’s hybrid retirement plan.

If Chicago had implemented this reform plan 10 years ago, the city’s four pension plans would have an aggregate unfunded liability of approximately $5 billion, compared to the city’s current $19 billion.

In addition, the city’s annual contribution would equal about $423 million per year. That’s lower than the city’s current contribution and it’s nearly $600 million less than the 2015 contribution of more than $1 billion under current law.

A plan like this needs serious consideration by the state politicians, Chicago alderman and Mayor Rahm Emanuel.