After the highly public, five-week spectacle of winning City Council approval for his first annual budget, the next phase of Mayor Rahm Emanuel’s efforts to restore Chicago’s fiscal health will take place mostly behind closed doors in union contract talks that could last many months.
Wrangling unanimous support for his 2012 budget from all 50 aldermen in Wednesday’s vote could prove a lot simpler than Emanuel’s negotiations with labor representatives for police officers, firefighters and white-collar city workers whose contracts expire in seven-and-a-half months.
The next stage could be just as crucial as the budget vote to Emanuel’s stated goal of bringing City Hall spending in line with its means, because 85 percent of day-to-day operating expenses involve paying rising wages, benefits and other personnel costs for city workers.
Although the ranks of city workers have thinned significantly in recent years, paying those workers has become increasingly costly due in large part to contracts signed under former Mayor Richard M. Daley, who granted pay hikes and saw a dramatic spike in health benefit expenses.
Even as the corporate budget payroll shrank by 2,500 spots, personnel costs jumped 11.6 percent between 2003 and last year, city records show. Wage expenses increased to an average salary of $75,000 a year, from $64,000 in 2003, while benefit costs jumped 37 percent. After benefits were factored in, the city’s average cost per employee was $91,000 a year in 2010.
After Wednesday’s budget victory, Emanuel made clear that he intended to rein in those expenses, referring to “hidden costs in our contracts that are burdening our taxpayers.”
“This doesn’t solve everything,” he said. “We have issues of the pensions to deal with. We have issues of contracts to deal with since labor costs are such a big part of the budget.”
The contracts for police and firefighters, whose wages account for 77 percent of the city’s employee pay costs, are set to expire on June 30, 2012. The collective-bargaining agreement with the union of clerical employees, who will bear the brunt of Emanuel’s 2012 layoffs, also ends in the middle of next year.
In 2007, Daley forged 10-year contracts with labor groups representing about 7,300 blue-collar city workers, but clauses in those deals could give Emanuel the ability to try to end those agreements as early as next year.
“Even a significant economic recovery, where the economy rebounds briskly in six to nine months, would be unlikely to generate revenues equal to the built-in increases in the cost of city government,” said Laurence Msall, president of the Civic Federation, a business-funded tax watchdog group.
Emanuel’s combination of spending cuts and “revenue enhancements” – tax, fee and fine increases – are intended to bridge a budget deficit next year of almost $636 million. Without such changes, and with only modest growth in economically sensitive revenues, Emanuel aides projected that the deficit would have swelled to $741.4 million in 2013 and almost $800 million the following year.
If fully enforced, the budget measures in the mayor’s 2012 fiscal plan would greatly, but far from entirely, close those future deficits, Msall said. The shortfalls could still be in the hundreds of millions of dollars.
“We think he has probably reduced two-thirds of the structural deficit,” Msall said.
The projected deficit figures did not include the costs of making up for the city’s failure to adequately fund employee pensions. Emanuel’s 2012 budget devotes about $500 million to fund pensions, although catching up on pension obligations would require that the city contribute $1.2 billion a year.
Emanuel told reporters Wednesday that he supported state legislative efforts to overhaul the pension system. Such legislation has failed to garner support in Springfield.
“What we have now is not honest to the people relying on the retirement system and it’s not honest with the taxpayers who are ultimately on the hook to pay for it,” the mayor said. “I have to work with Springfield and the leaders in Springfield to get it done.”
Two other measures in Springfield could give Emanuel a lot more money to work with. He won legislative approval last week to install speed cameras in much of the city begining in July 2012, but Gov. Pat Quinn has not said whether he will sign the bill, and the concept also would require council backing. Quinn already has blocked Emanuel-endorsed legislation that would include permission for a lucrative new casino in Chicago.
While promising to be fair to his employees, Emanuel’s future financial initiatives certainly will be pursued in the name of the same principle that he said had guided his 2012 budget push: “The city taxpayer took priority over the city payroll.”
Hunter Clauss contributed reporting.