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S&P To Rahm: Fix Chicago’s Pensions or Face The Consequences

Rahm Emanuel won’t get much time to savor Tuesday’s victory over Jesus “Chuy” Garcia in Chicago’s runoff election. Standard & Poor’s is looking to downgrade its rating of the city if it doesn’t do something about its pensions crisis, and fast:

“If the city fails to articulate and implement a plan by the end of 2015 to substantially fund its pension contributions, or if it substantially draws down its reserves to fund the contributions, we will likely lower the rating. This is regardless of whatever relief the state Legislature may or may not provide,” the news release said.

Chicago currently faces a pension shortfall totaling $35.05 billion, and 2016 will bring a $550 million increase in its payments to pensions for firefighters and police. Labor unions have challenged recent reforms with a lawsuit against the city’s pension fund, and they could be overturned if the Illinois Supreme Court rules that similar reforms by the state government are unconstitutional. Raising Chicago’s property taxes to the level required to make good on all the obligations could decimate the tax base. A proposed casino project could help, but would start bringing in money only down the road.

Moody’s already downgraded Chicago to near-junk status in February. S&P’s move would only exacerbate an already terrible situation, making it harder for the city to finance the existing debt burden.

It’s not going to be a fun four years for Rahm.

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  • FriendlyGoat

    This implies that if Rahm had any sense, he wouldn’t want the job, right?

  • mdmusterstone

    That’s actually a great question FG. Rationally why would anyone take a job that
    seems impossible without having a plan to solve it; he’d be a one legged man in
    the ol’ a** kicking contest. So he must
    have a plan not available for publication.
    I can only think of two such.
    One, to skim money either for himself or friends and then call in his
    chips from said friends after his four years, or, two, count on a bailout from
    the Obama administration. But both plans
    are fraught with deep pit falls. Is
    there a number three?

    Well, yes, there is. It’s to do a great Progressive job “trying to solve” the problem while blaming the Repubs for not solving it, and then moving on to run for a higher office. It isn’t a matter of solving the problem but a matter of how successfully can you lay blame on anyone and everyone other than your self. The problem? Why it just motors on for the next yahoo to play the same game again.

    • JR

      Yeeeeessss….. While I agree with you on the whole “kick the can down the road” strategy, I think the can is heavy enough and the road short enough that it is time for decisions to be made. S&P’s 2015 deadline is there for a reason. Nobody gives or a gave that much of a $#%@ about Detroit. Chicago is another matter. Downgrade that city to junk and raise the real specter of bankruptcy and you will see where there bodies are buried.

  • mdmusterstone

    Let’s explore this a little further. To this old Mid-Westerner there are only four
    vectors that can draw corruption; the devil’s temptations for those of you into
    that. And those four things are: Power,
    Money, Drugs and Sex. I think we can
    ignore the latter two. As of this
    afternoon it occurs to me that Power is the clear winner of the four. Kissinger said that power is the great aphrodisiac,
    and I think that’s not all, and I agree that the reaming three fall to
    Power. People who win the lottery have
    money but only a relatively low level of power all things considered.

    So let’s say in Power politics you have a seemingly intractable problem. You can solve it where after you are the
    golden boy. You can make the electorate
    think you’ve solved it, which game pols in Illinois
    have been world class players, while kicking the can down the road. Or you can play for an Academy Award performance
    of blood, sweat and tears, wanting to solve it desperate to solve it but those
    “other” bad guys wouldn’t let me.

    Sum: Watch what he is willing to be responsible for and what he is not willing to be responsible for,
    remembering that the fact is he is the mayor and responsible for it all regardless
    of clever blatherskite.

  • Josephbleau

    There is just as much money to be stolen during failure as there is during success, Madigan won’t notice the difference.

  • iconoclast

    Too bad Rahm no longer has control over the Dept. of Justice. He could hack up a lawsuit against S&P just like Holder.

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