Rahm Emanuel Makes Nice as Chicago Election Bypasses Pension Morass

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Chicago Mayor Rahm Emanuel greets residents inside a restaurant during a lunch stop on election day February 24, 2015 in Chicago, Illinois.

Photo by Scott Olson/Getty Images

Chicagoans could be forgiven if they found the humble man in the V-neck sweater unfamiliar.

“I can rub people the wrong way, or talk when I should listen,” a contrite Mayor Rahm Emanuel says in a television ad aimed at soothing a restive electorate.

The former White House and congressional political enforcer has been thrust back on his heels in his bid for a second term. Voters in this city of 2.7 million are witnessing a rarity: a competitive mayoral election.

Three weeks remain before the April 7 runoff between Emanuel and Jesus “Chuy” Garcia, a Cook County commissioner and fellow Democrat whose candidacy is the vehicle for grievances against the mayor and his efforts to steer the city away from insolvency. Chicago has $20 billion in unfunded pension liabilities, a school system deep in deficit and a credit rating dropping toward junk. It’s in danger of being overwhelmed by debt unless it embraces onerous solutions that probably would include retirement benefit cuts and tax increases.

“I don’t think I’ve ever seen such financial uncertainty and so many moving parts all going on at once, and no one wanting to blink first by saying what he’s going to do about it,” said Donald Haider, a former Chicago finance director who ran for mayor in 1987.

Fresh Competition

The last time Chicago went through such electoral suspense was 1983, when Harold Washington won a racially charged contest to become the city’s first black mayor. This election is more defined by ideology, pitting the union-backed Garcia, 58, against Emanuel, 55, who has close ties to the corporate elite and a reputation for aggression.

The mayor’s supporters include business executives such as Ken Griffin, chief executive officer of the hedge fund Citadel LLC, and Michael Sacks, chairman and CEO of Grosvenor Capital Management. Griffin contributed $250,000, and Sacks and his wife Cari combined gave $250,000, according to a recent campaign filing.

Garcia, who last week reported a $350,000 contribution from the American Federation of Teachers, has drawn endorsements from Democratic progressives including civil-rights leader Jesse Jackson, former Vermont governor and Democratic National Committee chairman Howard Dean, and Emil Jones Jr., the one-time president of the Illinois Senate who is known as President Barack Obama’s mentor. Obama has endorsed Emanuel.

Garcia and Emanuel will meet tonight in the first of three televised debates.

Emanuel held a 51 percent to 37 percent lead over Garcia in a poll taken March 6 through March 11 that was published in the Chicago Tribune. The survey of 712 registered voters has a margin of error of 3.7 percentage points. Garcia shrugged off the findings.

“This is a dead heat,” Garcia said March 13. “I have the greatest confidence that I will win.”

Whistling Past

While crushing debt bears down, including an additional $600 million pension payment the city must make next year, daily campaign discourse has focused elsewhere.

Emanuel, who was forced into a runoff Feb. 24 when he failed to win a majority against Garcia and three other challengers in the nonpartisan election, announced March 8 that the city would remove 50 red-light cameras, partly reversing his defense of a program that has come under loud criticism. Three days later, he proposed creating tax-free zones in impoverished neighborhoods, where his support was weakest in the February vote.

Garcia is backed by the Chicago Teachers Union, a vociferous critic of Emanuel’s 2013 closing of 50 public schools. He proposed an 18-page financial-recovery plan March 13, saying he wouldn’t support pension-benefit cuts unless they were negotiated. He said he would wait to decide on tax increases until after taking office.

“On April 8th, I will appoint a committee of experts to help us look at all the revenue options,” Garcia said during a press conference. “It is too early to tell residents of the city of Chicago that we’re going to give them that medicine.”

Others say it’s none too soon. Moody’s Investors Service downgraded the city’s credit rating Feb. 27, citing “highly elevated unfunded pension liabilities and continued growth in costs to service those liabilities.” The cut, to Baa2, or two levels above junk, underscored the peril that has Chicago the lowest-rated among the 90 biggest U.S. cities, excluding Detroit, which is fresh from a record $18 billion bankruptcy.

Yawning Chasm

Despite the visual contrasts of Chicago, a gleaming lakefront metropolis on Lake Michigan, to Detroit, a shrinking, post-industrial city on a river, the former’s financial morass draws parallels to the latter.

Detroit, a city of about 700,000, had unfunded pension liabilities of about $3.5 billion. Chicago has roughly four times the population and a retirement shortfall of $20 billion.

“People will say Detroit and Chicago aren’t alike, that they’re night and day, but if you burrow underneath the finances, I don’t think that’s true,” said Frank Shafroth, director of George Mason University’s Center for State and Local Government Leadership in Arlington, Virginia. “There’s a lot at stake here.”

For the city’s next leader, fixing the fiscal disrepair won’t be as simple as merely summoning courage. Illinois’s own financial stress will complicate the task. The state has $111 billion in unfunded pension liabilities and about $6.4 billion in unpaid bills.

Republican Governor Bruce Rauner, Emanuel’s friend and former business associate, has proposed cutting more than $300 million in income-tax, transit and pension assistance to Chicago and its schools. Nor can the city ease retirement costs without legislative approval.

Lawmakers restructured two of Chicago’s four pensions in June, affecting about 60,000 employees, who will pay more and get fewer benefits. The progress, touted by Emanuel’s administration, is tenuous; unions have sued.

“It’s a three-ring circus,” Haider said. “The courts with pensions, Rauner with the budget and the city with its back against the wall.”

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