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.