Chicago's Rahm Emanuel Wins Re-Election; Now Comes the Hard Part

by | April 8, 2015

By Bob Secter and Hal Dardick

With his re-election victory Tuesday, Chicago Mayor Rahm Emanuel renewed his lease on a municipal fixer-upper, one with buckling and painful-to-repair financial underpinnings caused by decades of deferred maintenance.

Some of the mayor's first-term repairs were modest, aimed at papering over any need for broad tax hikes that antagonize voters. Now comes the hard part.

Depending on how the next several months play out, by year's end Emanuel may have to find a way to close $2 billion in budget deficits at City Hall and Chicago Public Schools. The shortfalls are driven mostly by long-bypassed pension funding costs coming due.

Relief from Springfield, the prescription floated often on the campaign trail, could be spotty and slow to develop given that state government is struggling with its own finances while trying to find its way under a politically divided government for the first time in 12 years. Emanuel also is rolling the dice on a pending Illinois Supreme Court ruling that could bring clarity to whether he can or can't further trim pension costs.

Money problems are hardly the only challenge with which Emanuel must quickly grapple, though the overhang of red ink complicates resolution of everything else.

Shootings and homicides, which had fallen after a troubling spike in 2012, are up again this year, raising fresh questions about a controversial crime-fighting strategy reliant on heavy police overtime spending rather than the expensive hiring of more cops to patrol the streets.

The current contract with Chicago Teachers Union, reached in 2012 after a seven-school-day strike, expires in June. There remains no love lost between the mayor and the labor group that was central to challenger Jesus "Chuy" Garcia's now-failed opposition to Emanuel's re-election.

Another question for Emanuel is whether he will rein in his in-your-face personality, a trait he acknowledged in a pair of TV ads during the runoff campaign. In one he told voters he knows he can "rub people the wrong way." In another he praised Chicago as a great city that "can do even better," then pointed a finger at his chest and said, "And yeah, I hear ya. So can I."

Such worries, however, pale next to the gaping money pit that has led credit rating agencies to sour badly on the financial viability of city government and the schools.

The lay of the land is this: Emanuel's administration heads into its 2016 city government budget planning cycle with a projected $430 million operating deficit to close. On top of that is an additional $550 million in increased payments the city owes to its police and fire pension funds after years of shorting obligations.

The problem is even more acute at CPS, where a once-flush teachers retirement fund has been ravaged by wholesale diversions of billions of dollars of tax money owed to the pensions over much of the past two decades. The tab for simply beginning to redress the damage accounts for most of the $1.14 billion deficit looming next year at the school district.

On the campaign trail, Emanuel argued that he was making slow but steady progress cleaning up a financial mess he inherited. In doing so, he avoided naming who it was he inherited the mess from: his mayoral predecessor and political mentor, Richard M. Daley.

Budget watchdogs, however, say Emanuel is not blameless and has allowed financial woes to fester.

The nonpartisan Civic Federation has been particularly critical of what it called an "accounting gimmick" by Emanuel's hand-picked Chicago Board of Education to make the current year's $6.8 billion schools budget appear balanced. In short, the board eliminated a deficit on paper by applying 14 months of property tax revenue to a spending plan meant to cover 12 months.

"It represents a short-term, shortsighted plan in the midst of a grave and ongoing fiscal crisis," the watchdog group concluded in an analysis of the budget. "CPS is delaying the inevitable by not addressing the devastating financial reality."

The Civic Federation also has been critical of Emanuel for continuing a Daley borrowing practice sometimes referred to as scoop-and-toss, essentially borrowing new money to pay off old debts. The tactic avoids big expense in the near term by pushing the day of reckoning to satisfy those debts off into the future at ultimately higher cost.

With his re-election approaching, delay also was on the budget menu on the city government side of Emanuel's domain.

The mayor punted last fall when it was time to decide whether to seek a property tax increase to cover those big and looming payments owed to pension funds for police, fire and other workers. Emanuel instead invoked a little-known state law that let him put off a decision until as late as this December _ well after the city elections and just before the big pension bills start to come due.

As he sparred during the campaign with challenger Garcia, Emanuel portrayed himself as the man with a clear plan to set the city's finances in order while minimizing the financial cost for taxpayers. The rescue plan the mayor outlined, however, largely amounts to a wish list of revenue relief he hopes to secure from elsewhere.

On that list is a renewed push to win approval in Springfield for a long-debated city casino, with profits earmarked for pensions.

Emanuel also hopes to persuade lawmakers to expand the state's sales tax to cover an array of services, reaping additional revenue to benefit both state and local governments. The idea is similar to one he highlighted in campaign ads during his first mayoral run in 2011 but then didn't publicly pursue once in office.

Also on Emanuel's Springfield agenda is getting the state to underwrite significantly more of the funding costs for Chicago teacher pensions, which he contends are badly shortchanged in comparison to funding earmarked for downstate and suburban teacher pensions.

But the state is suffering financial problems of its own. So solving Emanuel's problem by asking all Illinois taxpayers to chip in could be a tall order in a divided government where Democrats control the legislature, Republican Bruce Rauner sits in the governor's office and austerity rules the day.

Rauner noted Monday that Chicago has "gotten a lot of extra money from the state in various ways" for education and mentioned that Chicago Public Schools took so-called pension holidays under which the district's full contributions were not made.

"Now that they've decided not to fund their pension for a number of years and it's virtually bankrupt, they say, 'Oh, it's not fair that we had to fund our own pension,'" Rauner told The Chicago Tribune Editorial Board. "Come on, let's be a little more rational about this."

In addition, a wild card for Emanuel lies in the state Supreme Court, which last month heard oral arguments in a dispute over whether the state constitution bars any attempt to trim back public employee pension benefits.

The ruling, expected within months, technically would apply only to anticipated benefit cuts for workers covered by state-run funds that have run up huge and difficult-to-eradicate debts, much like the pension funds for Chicago workers.

The decision in the state case could affect decisions in similar lawsuits filed against the city and could provide a legal template for Chicago in dealing with its own pension troubles.

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