Introduction to the Crisis
Fifteen independent City Council members put Mayor Brandon Johnson on notice Tuesday: Any move he makes to use city funds to cover a $175 million pension for non-teaching school employees must be made with legislative consent.
The Background
Johnson does have not have the votes on the partially-elected Chicago Board of Education to approve a borrowing or refinancing measure, after seven board members declared their opposition to mayor’s favored option. As a result, the mayor is now on the clock to come up with a Plan B before city auditors close the books on 2024 on Monday. He could end the accounting year in the red, find the $175 million for the pension payment elsewhere in the city budget, or dip into the city’s reserves. Any of those options could trigger yet another reduction in the city’s already reduced bond rating.
The Common Sense Caucus
Calling itself the “Common Sense Caucus,” the fifteen-member group of anti-administration alderpersons worries that Johnson will go around the City Council to avoid risking another embarrassing political defeat. Tuesday’s warning letter demands:
- City Council authorization for any “fund reallocation or reappropriation needed to cover” the shortfall “including reserves, surpluses and departmental turnover.”
- Quarterly reporting to the budget and finance committees on “revenue, departmental spending, turnover and cash-flow management.”
- That removing the city’s pension obligation to Chicago Public Schools be Johnson’s “main priority” during the spring legislative session.
Concerns and Expectations
“Though we would rather work collaboratively to solve this problem, we are prepared to act legislatively to ensure our requests are met if any attempt to exclude the concerns of Chicago taxpayers were to transpire,” the letter states. Ald. Anthony Beale, (9th), said he’s convinced Johnson will “pull some underhanded shenanigans to cover” the $175 million pension payment. “His approval rating is at 6%. He doesn’t have the juice or the political muscle to get the votes. So he’s gonna try to do something to circumvent City Council. But we are the ones who appropriate money,” Beale said.
Legal and Financial Implications
Civic Federation President Joe Ferguson said the mayor does have “some capacity to move money” between various areas within the revenue pools, “but it’s not limitless.” He called the legal issues raised by Tuesday’s letter “murky.” Normally, short-term fund transfers within the mayor’s authority are limited to “monies drawn that are very short-term in order to meet some obligation, knowing that there are revenue streams to back it. But the timing of the revenue stream doesn’t line up with the calendar,” Ferguson said. “This is an unusual situation in which there simply isn’t an alternative revenue stream that anyone is waiting for. This is about moving money from existing pools knowing that there is nothing to replenish it with. That’s where there are some constraints and limitations,” Ferguson said.
Possible Solutions and Next Steps
Sources close to the mayor did not rule out seeking Council approval — either to dip into the city’s reserves or to authorize a fund transfer within the confines of Johnson’s $17.1 billion budget. “Our expectation is, it won’t require any Council vote,” said a top mayoral aide, who asked to remain anonymous. “Pulling from reserves could be an option. But…until we have the full reconciliation…it’ll be noted as a revenue loss. How we solve for it will be informed by the fuller picture of how other revenues perform….If it’s a methodology that requires Council approval, we’ll go to Council. If it does not, we won’t.”
Conclusion
The situation presents a significant challenge for Mayor Johnson, who must navigate the complexities of city finances, legal requirements, and political opposition to find a solution to the $175 million pension payment crisis. The involvement of the City Council and the scrutiny of the Civic Federation and other stakeholders ensure that any solution will be closely examined and debated.
FAQs
- Q: What is the amount of the pension payment that the city needs to cover?
A: $175 million - Q: Why does Mayor Johnson need to seek City Council approval?
A: Because he does not have the votes on the Chicago Board of Education to approve a borrowing or refinancing measure. - Q: What are the possible options for covering the pension payment?
A: The city could end the accounting year in the red, find the $175 million elsewhere in the city budget, or dip into the city’s reserves. - Q: What are the demands of the Common Sense Caucus?
A: City Council authorization for any fund reallocation, quarterly reporting, and making removing the city’s pension obligation to Chicago Public Schools a main priority. - Q: What is the role of the Civic Federation in this situation?
A: The Civic Federation is scrutinizing the legal and financial implications of the mayor’s possible actions and emphasizing the need for transparency and City Council approval where necessary.
