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Emanuel's 2014 Budget Speech Includes Warning About Pension Crisis

CHICAGO (CBS) -- Mayor Rahm Emanuel unveiled his budget plan for next year, a spending proposal that relies on tens of millions of dollars in increased fees, fines, and taxes, though it avoids hiking property or sales taxes.

However, the mayor also warned aldermen the city his efforts to avoid raising property taxes has been put in jeopardy by the continuing pension crisis in Illinois.

"Our pension debt threatens all of the investments we've made in the past two years to reform and strengthen Chicago for the future," he said.

Emanuel said he could be forced to double property taxes a year from now, or significantly reduce city services, unless state lawmakers approve major pension reforms.

Emanuel Presents 2014 Budget Plan

The mayor said the city's pension obligations will balloon to $1 billion for fiscal year 2015, when the city must make a $600 million contribution to severely underfunded police and firefighter pension funds.

He has been pressuring state lawmakers to put off that $600 million payment until 2023, while he works with police and fire unions to negotiate pension cost concessions.

Emanuel presented his budget plan to aldermen three months after telling alderman the city was facing a shortfall of approximately $339 million. While the mayor said that budget deficit was "still too large," he noted it's the smallest deficit the city has faced in the past five years.

"This budget will mark the third year in a row that we have balanced city finances without raising property, sales, or gasoline taxes," he said.

WBBM Newsradio's Craig Dellimore reports the mayor's spending plan revealed precious few details for its $8.7 billion size, though many of his ideas to plug the $339 million budget hole already have been floated in recent days and weeks. Among them:

  • Hikes in various parking fines, and vehicle impound fees, which should bring in $10 million.
  • Higher taxes on cable TV services, which are expected to bring in $9 million more.
  • The new speed cameras, which the city has estimated would bring in $60 million, matching the haul from red light cameras.
  • Higher fees for zoning applications; and higher fees for anyone who files zoning applications in person, rather than online, which are expected to bring in $4 million in additional revenue.
  • A 75-cent-per-pack increase in the city's cigarette tax, for another $10 million.

The Emanuel administration also expects a growth of more than $100 million in rebounding revenues from sales taxes, income taxes, hotel taxes, and the real estate transfer tax.

The mayor said revenue from the cigarette tax increase would be used to help pay for health care for children. Other new revenue also would be used for programs for kids.

"I promised that revenue from the new speed camera enforcement in children safety zones would go to keeping our children safe, and this budget does exactly that. We will be creating a children's fund to ensure that this … new money is dedicated to keeping our kids learning, and safe," he said.

According to documents provided by the mayor's office, the children's fund will provide:

  • $13 million for afterschool programs for 16,000 children;
  • $14.5 million for summer jobs programs for more than 12,000 kids;
  • and $11 million in early education programs.

Ald. Nick Sposato (36th) said the devil's in the details, and aldermen were still poring over those, and would continue to suss out the finer points of the plan at budget hearings over the next few weeks. Budget hearings begin on Monday at City Hall, and continue through early November. At those meetings, city department heads will present their individual spending plans, and answer aldermen's questions about specific programs.

Even before the mayor officially unveiled his budget plan Wednesday, he was getting pushback on his plan to raise cigarette taxes.

Tanya Triche, general consul for the Illinois Retail Merchants Association said, with Cook County and the state of Illinois also hiking cigarette taxes in recent years, the price of a pack of cigarettes would rise to $12 under the mayor's plan.

She said a pack of cigarettes costs only $6 across the state line in Indiana.

Triche said grocers already operate on "very thin margins," because they have to compete with stores in the suburbs, and Indiana, where taxes are lower.

"This is incentivizing people to not shop at those stores that are here in the city, and shop somewhere else," she said.

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