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Budget Thu Mar 13 2014
For some who have worked for the city their entire lives, the news that the city's credit rating has been lowered yet again hits close to home. They know that in the discourse around balancing the budget, slashing pensions inevitably takes front and center. Yet neither politicians nor the dominant media seem to call into question whether it is the retirements of hardworking people that should be one of the first budget items to get sacrificed when we fall on hard times.
Moody's Investor Service downgraded Chicago's bond credit rating last week to Baa1, giving Chicago the second lowest credit rating of any major city in the country. Detroit has the lowest. This single level downgrade was made all the harsher because it followed an unexpected triple bond level downgrade in 2013. Now, Chicago's bond rating is classified as just three levels above a junk bond.
In comparison, New York and Los Angeles both have bond ratings of Aa2, which is Moody's third highest rating.
A large part of the city's lowered credit rating has to do with its giant pension debt -- Chicago has the most underfunded pension debt of any municipality in the country. And this was a major factor in Moody's decision to downgrade. As reported in the Christian Science Monitor, Moody's report explained that their decision:
Reflects the city's massive and growing unfunded pension liabilities, which threaten the city's fiscal solvency absent major revenue and other budgetary adjustments adopted in the near term and sustained for years to come.
While the city has clearly underfunded pensions -- we have $20 billion in unfunded pension debt, along with a $14 billion bond debt -- the changes and sacrifices necessary to balance the budget, or at the least avert crisis, should not fall on the backs of the city's employees. There is no excuse for the city or state to renege on pension deals that they have already entered into with workers or retirees. The city is at fault if its administrations have not planned properly, not those who worked their entire careers for the city, often paying into their retirement plans, with the promise that the city was doing the same.
In this vein, a coalition of Chicago unions released a proposal last month, in which they suggested that cuts to pensions would negatively impact the economy in the Chicago area. Instead, the coalition proposed raising over $2.4 billion in revenues through various means that focused on the haves, rather than the have-nots. Among their solutions were closing corporate tax loopholes, and instating an incremental rather than flat income tax, so that those at the higher end of the income spectrum would pay a larger percentage of taxes.
The Emanuel Administration should take these solutions just as seriously as cuts to pensions. Our current flat tax rate, along with corporate tax loopholes, presently allow the wealthy to pay less than their fair share of income tax. With a graduated income tax, the state would bring in $6.3 billion more in revenue than with its flat rate tax, at the same time as 54 percent of Illinois residents would see their state income tax go down. A progressive mayor would support changing Illinois' unjust tax system instead of cutting pensions.
Pensions should not be viewed as the root of the city's budget woes. In addition to the state's tax system, Chicago is missing out on significant revenue due to its series of privatization deals. In 2005, the city privatized a busy toll bridge, giving away the regular toll revenue to a private company. Then in 2008, the city sold off our parking meters for 75 years for $1.2 million. As city residents know, the company, Chicago Parking Meters, LLC, has jacked up the parking rates all over Chicago to exorbitant prices, which resulted in parking revenues of a whopping $139 million in 2012. This is money the city could be making every year -- clearly a much greater sum in 75 years than $1.2 billion.
And the icing on the cake has been the privatization of our public transit payment system, Ventra -- which, as Jacobin Magazine put it, "is screwing everyone but the corporation behind it." John Flynn, who was central to the Ventra deal, is emblematic of what is wrong with Chicago's politics and budget. He worked for the Chicago Transit Authority from 2000-2008. From 2008-2010, he managed the Chicago division of Cubic Corporation. During this time, Flynn played a central role in the Ventra deal, which Chicago made with Cubic. Afterwards, he was rehired by the CTA.
While Emanuel was not in office when these deals were made, he seems to be going along with the privatization trend, as shown by his failure to change any of these bad deals, along with his unprecedented shift in funding from public to charter schools. Emanuel himself was previously an investment banker.
Put together, all this privatization is sapping the city's coffers. It is not right that hard-working Chicagoans should be the ones who suffer as Chicago's politicians increase their influence and businessmen (many not even Illinois residents) line their pockets. However, in a position consistent with his entire term, Emanuel has made no mention of reforms that target the one percent instead of the 99 percent. The day after the credit rating was released, Emanuel proposed a new budget, which aimed to spend less and thus decrease debt. In the budget, Emanuel did not propose any new taxation measures. However, he did call for cuts to programs that help city residents, including cuts to healthcare for workers and retirees that would save $26 million. At the same time as he called for cuts to social spending, Emanuel also urged state lawmakers to pass pension reform, as reported by Reuters:
Should Springfield fail to pass pension reform for Chicago soon, we will be right back here in council early next year to start work on the city's 2015 budget - a budget that will either double city property taxes or eliminate the vital services that people rely on.
Why isn't Mayor Emanuel supporting measures that would require the wealthy to give their fair share, such as a graduated income tax, rather than calling on the state to pass pension reform? Why isn't he supporting the middle and working class over large companies and charter schools? Maybe because Emanuel and his administration, much like Daley before him, consistently reveal themselves to be corporate Democrats who place the one percent first.