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Emanuel Makes Nice As Chicago Election Bypasses Pension Morass

By Tim Jones and Elizabeth Campbell, Bloomberg News (TNS)

CHICAGO — Chicagoans could be forgiven if they found the humble man in the V-neck sweater unfamiliar.

“I can rub people the wrong way, or talk when I should listen,” a contrite Mayor Rahm Emanuel says in a television ad aimed at soothing a restive electorate.

The former White House and congressional political enforcer has been thrust back on his heels in his bid for a second term. Voters in this city of 2.7 million are witnessing a rarity: a competitive mayoral election.

Three weeks remain before the April 7 runoff between Emanuel and Jesus “Chuy” Garcia, a Cook County commissioner and fellow Democrat whose candidacy is the vehicle for grievances against the mayor and his efforts to steer the city away from insolvency. Chicago has $20 billion in unfunded pension liabilities, a school system deep in deficit and a credit rating dropping toward junk. It’s in danger of being overwhelmed by debt unless it embraces onerous solutions that probably would include retirement benefit cuts and tax increases.

“I don’t think I’ve ever seen such financial uncertainty and so many moving parts all going on at once, and no one wanting to blink first by saying what he’s going to do about it,” said Donald Haider, a former Chicago finance director who ran for mayor in 1987.

The last time Chicago went through such electoral suspense was 1983, when Harold Washington won a racially charged contest to become the city’s first black mayor. This election is more defined by ideology, pitting the union-backed Garcia, 58, against Emanuel, 55, who has close ties to the corporate elite and a reputation for aggression.

The mayor’s supporters include business executives such as Ken Griffin, chief executive officer of the hedge fund Citadel LLC, and Michael Sacks, chairman and CEO of Grosvenor Capital Management. Griffin contributed $250,000, and Sacks and his wife Cari combined gave $250,000, according to a recent campaign filing.

Garcia, who last week reported a $350,000 contribution from the American Federation of Teachers, has drawn endorsements from Democratic progressives including civil-rights leader Jesse Jackson, former Vermont governor and Democratic National Committee chairman Howard Dean, and Emil Jones Jr., the one-time president of the Illinois Senate who is known as President Barack Obama’s mentor. Obama has endorsed Emanuel.

Emanuel held a 51 percent to 37 percent lead over Garcia in a poll taken March 6-11 that was published in the Chicago Tribune. The survey of 712 registered voters has a margin of error of 3.7 percentage points. Garcia shrugged off the findings.

“This is a dead heat,” Garcia said March 13. “I have the greatest confidence that I will win.”

While crushing debt bears down, including an additional $600 million pension payment the city must make next year, daily campaign discourse has focused elsewhere.

Emanuel, who was forced into a runoff Feb. 24 when he failed to win a majority against Garcia and three other challengers in the nonpartisan election, announced March 8 that the city would remove 50 red-light cameras, partly reversing his defense of a program that has come under loud criticism. Three days later, he proposed creating tax-free zones in impoverished neighborhoods, where his support was weakest in the February vote.

Garcia is backed by the Chicago Teachers Union, a vociferous critic of Emanuel’s 2013 closing of 50 public schools. He proposed an 18-page financial-recovery plan March 13, saying he wouldn’t support pension-benefit cuts unless they were negotiated. He said he would wait to decide on tax increases until after taking office.

“On April 8th, I will appoint a committee of experts to help us look at all the revenue options,” Garcia said during a press conference. “It is too early to tell residents of the city of Chicago that we’re going to give them that medicine.”

Others say it’s none too soon. Moody’s Investors Service downgraded the city’s credit rating Feb. 27, citing “highly elevated unfunded pension liabilities and continued growth in costs to service those liabilities.” The cut, to Baa2, or two levels above junk, underscored the peril that has Chicago the lowest-rated among the 90 biggest U.S. cities, excluding Detroit, which is fresh from a record $18 billion bankruptcy.

Despite the visual contrasts of Chicago, a gleaming lakefront metropolis on Lake Michigan, to Detroit, a shrinking, post-industrial city on a river, the former’s financial morass draws parallels to the latter.

Detroit, a city of about 700,000, had unfunded pension liabilities of about $3.5 billion. Chicago has roughly four times the population and a retirement shortfall of $20 billion.

“People will say Detroit and Chicago aren’t alike, that they’re night and day, but if you burrow underneath the finances, I don’t think that’s true,” said Frank Shafroth, director of George Mason University’s Center for State and Local Government Leadership in Arlington, Va. “There’s a lot at stake here.”

For the city’s next leader, fixing the fiscal disrepair won’t be as simple as merely summoning courage. Illinois’s own financial stress will complicate the task. The state has $111 billion in unfunded pension liabilities and about $6.4 billion in unpaid bills.

Republican Governor Bruce Rauner, Emanuel’s friend and former business associate, has proposed cutting more than $300 million in income-tax, transit and pension assistance to Chicago and its schools. Nor can the city ease retirement costs without legislative approval.

Lawmakers restructured two of Chicago’s four pensions in June, affecting about 60,000 employees, who will pay more and get fewer benefits. The progress, touted by Emanuel’s administration, is tenuous; unions have sued.

“It’s a three-ring circus,” Haider said. “The courts with pensions, Rauner with the budget and the city with its back against the wall.”

Photo: ctaweb via Flickr

Chicago Mayoral Race Mirrors Schism Challenging Democratic Party

By Tim Jones and Elizabeth Campbell, Bloomberg News (TNS)

CHICAGO — The Democratic Party is riven over how loud a voice to give its progressive wing. Chicago is that struggle’s new frontline.

Mayor Rahm Emanuel, who has dared to anger his party’s organized-labor allies, is being challenged in the city’s first mayoral runoff by Jesus “Chuy” Garcia, a Cook County commissioner who forced it with backing from the Chicago Teachers Union.

“This is a fight about the soul of Chicago and whether Chicago is going to be a city for working people,” Garcia said in an interview.

On April 7, voters may make Garcia the next Bill de Blasio, the New York mayor who vanquished establishment favorite Christine Quinn in 2013. Another possible analogue: Zephyr Teachout, the law professor who forced New York Gov. Andrew Cuomo to steer left before she won just a third of the vote in September’s Democratic primary.

For Emanuel, it’s an awkward time to be an Illinois Democrat with enemies in labor. Republican Governor Bruce Rauner, a friend and former business associate, is attacking unions as a catalyst of the state’s financial crisis. The governor wants to let municipalities create zones in which union membership is optional in businesses or public jobs with collective-bargaining agreements.

In neighboring Wisconsin, Governor Scott Walker, a potential presidential candidate, is expected to sign legislation letting employees in union workplaces opt out of membership and dues.

Emanuel’s dilemma echoes that of Hillary Clinton, widely expected to run for the Democratic presidential nomination. She met in December with the darling of the party’s left wing, Massachusetts Senator Elizabeth Warren, The New York Times reported. She was soliciting policy ideas and possibly co-opting a potential challenger.

“These are the tensions that exist between the progressives and the centrists in the Democratic Party,” said Alan Gitelson, a political scientist at Loyola University Chicago.

Emanuel’s tense relations with elements of his own party date to his days as a White House aide helping President Bill Clinton pass the North American Free Trade Agreement, which unions opposed.

Two decades later, Emanuel has been unafraid to challenge organized labor as mayor of a debt-ridden city. He pushed pension-benefit cuts on employees, fought 30,000 unionized teachers in a rancorous strike and, in 2013, closed 50 schools.

Chicago’s election, while nonpartisan, is fought between Democrats in a place that the party has dominated for decades.

Labor is split. The teachers union, whose 30,000 members must live in the city, backed Garcia after its president, Karen Lewis, a fierce Emanuel critic, decided not to run after a cancer diagnosis.

Bricklayers, plumbers and electricians are among the unions backing Emanuel. Don Finn, business manager for the International Brotherhood of Electrical Workers Local 134, called him “the construction mayor.” Still, those workers aren’t required to live in the city, so their impact is harder to measure.

Emanuel’s critics have portrayed the campaign as a referendum on “two Chicagos” — a prosperous downtown where corporate leaders support the mayor, and minority neighborhoods that bore the brunt of the school closings and a 12 percent increase in shooting incidents last year.

Emanuel rejects the argument and notes the passage of a $13 minimum-wage measure during his first term. He also defends closing what he called underperforming and underused schools.

“I didn’t make the tough decisions just because I enjoy it,” Emanuel said at a South Side senior center the day after the Feb. 24 election. “I made the tough decisions because I wanted to see jobs come back.’

The struggle’s backdrop is financial stress. Moody’s Investors Service underscored the threat of insolvency when on Feb. 27 it cut Chicago’s credit rating to within two steps of junk because of mounting pension liabilities. The Baa2 rating is the lowest among the 90 biggest U.S cities, excluding Detroit.

“It takes away the idea that you’ll be able to wait to get into office to come up with a plan,” said Laurence Msall, president of the Civic Federation, a nonprofit government- finance research group.

The third-most-populous U.S. city has $20 billion in unfunded retirement obligations and must pay $600 million into its retirement funds next year. Chicago can’t alter pensions without state legislative approval.

When asked Feb. 25 about the crisis, Emanuel pointed to agreements he had already brokered for two of the four funds. Lawmakers in June approved the restructuring for about 60,000 municipal employees, who will pay more and get fewer benefits.

Other unions sued, and the litigation was put on hold until the Illinois Supreme Court rules on a separate challenge to a state pension overhaul.

Last week, Emanuel said he would use the pact with laborers and municipal employees as a model for police and fire funds.

During a Feb. 25 interview on a public-affairs television program, Garcia wouldn’t commit to tax increases to resolve the pension crisis. He has criticized the school closings, saying in December that he’s considering whether some can be reopened. Last week, he softened that position.

“We’re strapped for resources,” Garcia said. “I don’t want to get into making commitments that will be very difficult to honor.”

Neither campaign is taking labor for granted. Emanuel made sure to greet neon-vested water-department workers across the street from the senior center he visited.

Less than 24 hours after polls closed, Garcia’s campaign issued its first news release, condemning what it called discrimination against pregnant teachers.

Photo: ctaweb via Flickr