“…Aside from cutting budgets for half of the city’s mental health clinics, Rahm Emanuel has also subjected city workers’ pensions to the austerity knife. Currently, Illinois’ pension fund for state employees is underfunded by $111 billion, and Chicago’s pension fund for municipal employees has $19.5 billion in unfunded liabilities. Emanuel has proposed phasing out subsidies to retirees’ healthcare deductibles and scaling down cost-of-living adjustments, saying that without the cuts, he would have to raise property taxes by 150 percent.
“While teachers, firefighters, police officers, and other city workers have been living up to their end of the bargain and making annual payments amounting to 9.4 percent of their total annual salary, neither the city of Chicago nor the state of Illinois made any payments between 1995 and 2000. At the time, financial markets were delivering high returns on investments, and government officials in Chicago and Springfield decided to take ‘pension holidays,’ in which money earmarked for the pension fund was instead spent on city services.
“‘For the Daley administration, this had the benefit of keeping city services funded and property taxes low,’ said Fred Klonsky, a retired teacher and member of the Illinois Education Association. ‘But now, Rahm is saying that they’re not going to pay back the money they didn’t pay in, and will cut pension benefits instead, which they’ve already begun to do.’
“So even if Chuy Garcia won in the mayoral runoff, how would the city pay back the $19.5 billion it owes to workers’ pension fund? According to Phillip Cantor, chair of the Science Department at Chicago’s North-Grand High School, a small sales tax on financial transactions at the Chicago Mercantile Exchange (CME) and the Chicago Board of Trade (CBOT) could fund the pension shortfall just one year after being enacted.
“‘When someone has to buy a pair of shoes for their kid, they’re paying a 10 percent sales tax. But when I buy $100,000 worth of stock or pork belly futures, I don’t pay any sales tax or transaction tax,’ Cantor said. ‘We could charge a half percent on financial transactions and not have to talk about pensions ever again.’
“Indeed, this solution was already proposed – Illinois state representative Mary Flowers’ HR 1554, introduced in 2013, would impose a 0.01 sales tax on all stock and derivatives transactions within the CME Group, which includes the CBOT. The tax is projected to bring in as much as $80 billion per year according to some estimates, and would even exclude transactions held in retirement or mutual fund accounts.
“Klonsky, who is unable to accept Social Security benefits for himself or through his spouse due to his status as a retired state employee, depends entirely on his teachers’ pension as his sole source of retirement income. He says undoing Illinois’ flat income tax rate of 3.75 percent for all taxpayers regardless of what they earn, and instituting a progressive income tax, would go a long way to alleviating the crisis of workers’ underfunded pensions.
“‘A housekeeper at the Hyatt hotel in downtown Chicago pays the same income tax rate as the Pritzker family, who owns the Hyatt hotel,’ Klonsky said. ‘This is a very, very wealthy state… If you want to fund a city or a state government’s services, you don’t do it by going after those who don’t have any money…’”