Chicago: Are Crushing Taxes Rahm’s Way of Crushing the Unions?Posted: September 6, 2016
The city of Chicago is in the midst of a financial crisis. Or is it? The official record indicates that the city faces a budget shortfall of $137.6 million. This deficit was left after borrowing $220 million at high interest rates due to the city’s disastrously low credit rating. (However, borrowing at such high interest rates is a bonanza for financial institutions buying the city’s bonds. Meanwhile, the Chicago Public Schools is seeking approval to borrow as much as $945 million.) The city’s plan is to eliminate the deficit through cost cutting (reductions to already diminished city services) and increases in revenue from “taxes, fines, or fees.”
But Chicago citizens, especially property owners, are already reeling from massive increases in property taxes and service fees. This year, property taxes have increased by $588 million. Add to this the new $9.50 per unit monthly trash collection fee that is estimated to raise $62.7 million annually. It is fair to say that Chicago citizens are being squeezed. Property owners will doubtlessly pass their higher costs on to renters, increasing the rapidly rising rents throughout the city.
The reason for these massive tax increases is the requirement that the city make up long overdue payments to its public union pension funds, the most expensive of which are the funds for police and fire personnel and public school teachers. The reason for this crisis is that the city – that is, the mayor and city council – has for the last 20 years failed to make the mandatory payments into these pension funds. Why? Because it was easier to use the funds for the operational costs the city incurred and at the same time hold down the rise of property taxes and fees for city services.
The city’s financial crisis led to the terrible deals that gave over to private corporations control of our parking meters and the Chicago Skyway. And these ill-conceived responses only deepened the fiscal hole into which the city’s taxpayers were thrown. But since politicians continued to promote the false belief that city services could be maintained – even improved – while holding down taxes, they were forced to maintain the illusion that this was, in fact, happening. Their tactics ranged from the tried and true practice of withholding city services from poor – especially Black and Latino – neighborhoods, to maintaining property tax rates while raising real estate assessments (i.e., increasing tax revenue from most property owners while showing that tax rates were being held at current levels), to selling off public assets in exchange for short-term budget relief.
The overdue pension payments eventually came back to bite all of us. And all of us are to some degree culpable for this situation. We – the citizens of Chicago – demanded that our officials do the impossible: provide excellent services for a world class city while not making anyone pay for them. And our politicians agreed to play this game of mirrors in exchange for our keeping them in office. And greedy corporations of all stripes were quite happy to make lucrative deals at the city’s expense, enjoying tax breaks and incentives that include the benefits of the city’s ubiquitous TIF (Tax Increment Financing) districts.
The unions – especially the Chicago Teachers Union (CTU) – participated in this conspiracy of silence because the money that wasn’t paid into their retirement fund was available for pay increases that bought labor peace. For a while.
In recent years the CTU has become one of the nation’s most militant unions. The 2012 strike put the CTU in the forefront of labor militancy, especially as they joined with other groups fighting for better wages and working conditions for fast food and hospitality workers. They also put Mayor Rahm Emanuel on notice that his anti-labor stance would not go unchallenged. The animosity between Mayor Emanuel and CTU President Karen Lewis broke out publically prior to the strike and even now rumbles just below the surface.
The disenchantment of segments of organized labor and their supporters contributed to the first mayoral runoff election in the city’s history, pitting incumbent Emanuel against County Commissioner Jesus “Chuy” Garcia in 2015.
It is in this context – the defiance of the CTU and their allies, and their ongoing labor challenge to the policies of both Mayor Emanuel and Illinois Governor Bruce Rauner – that I’m positing a thesis that can serve as a corollary to the problems of property taxes and pension funding.
While supposedly political adversaries, Mayor Emanuel and Governor Rauner have a lot in common. They have long shared financial agendas and political donors. The current partisan budget conflict at the state level has led to a highly publicized conflict between the two leaders. But beneath the harsh rhetoric, both men share a barely concealed contempt for organized labor, especially in the public sector, and most especially for unions like the CTU that openly challenge the policies and ideologies of the mayor and governor.
So it shouldn’t come as a surprise if the crushing tax burden that Chicagoans are just now coming to terms with is laid at the feet of the CTU. And if the mayor is successful in creating a narrative that blames the union for the suffering of property owners, he can use the rancor of taxpayers to undermine the union’s credibility, moral authority, and political power. And if the CTU can be brought to heel, other, weaker, militant worker initiatives can be easily crushed. And the whole Chicago labor establishment can again be put under the control of City Hall. And what better time than in an election year, when nominal Democrats can make lofty claims on workers’ party loyalty?
How likely is it that the mayor and his allies (as well as the governor and his supporters) can get enough of the city’s taxpayers to blame the CTU for their financial distress and turn on them? How likely is that the people will give the politicians a pass and turn their ire on their fellow workers?
Let’s do a thought experiment using one of my favorite media formats – TV commercials. In our first commercial we see Matthew McConaughey, cool as he wanna be, chatting with his dogs from the driver’s seat of a Lincoln Navigator. The car is luxurious, the dogs are elegant, and McConaughey exudes modern masculine charm. The viewer thinks, “Man, I’d sure like to have that car. How cool would that be?”
In our next commercial, Kristen Bell is cheerfully scooping melon balls for the happy children at her daughter’s birthday party. Her husband calls from the supermarket to see if they need anything. Since she’s too busy to look, he clicks on an app on his phone and the refrigerator lets him know that they need eggs. Our viewer thinks, “Wow. I want that fridge. I have to go to mine and open it to see what’s in it. To be able to check it using my cell phone…Wow!”
Now, an imaginary and wholly unlikely commercial. A luncheon for a retiring teacher. In a voiceover the teacher says, “I’m glad that I don’t have to worry about my financial wellbeing, thanks to the retirement package my union negotiated.” And our viewer thinks – no, shouts – “You greedy bastard! Where do you get off getting all this money for doing nothing.”
There’s something about Americans. When one of the elite gets hold of something good, we identify, we put ourselves in his or her place and vicariously enjoy their happiness. But when a member of our own class obtains a good from which we ourselves would benefit, we are overcome with resentment and deny the justice embodied in their good fortune. So, I’m not willing to totally abandon my conspiratorial musings.
However, there are some things that we can do to prevent the use of the purported fiscal crisis to discredit the teachers union (and, by extention, militant unionism altogether). First, those of us with access to social media should use our communication skills to tell the truth about the origins of the pension funding deficit. Next, the CTU leadership should acknowledge the complicity of its former leaders in creating this situation and state its commitment to working with responsible public officials to resolve the pension funding problem in a way that is fair to Chicago taxpayers. Finally, we need to closely examine the claims that the city lacks the resources to solve the pension crises without impoverishing its citizens in general and homeowners in particular.
In the opening paragraph of this post, I questioned the authenticity of the financial crisis. A few weeks ago, I heard an interview with Tom Tresser, author of the book Chicago is Not Broke. Funding the City We Deserve. Tresser argues that the financial crisis is a fabrication. He claims that there is money available other than what can be obtained through higher taxes and fees. He classifies this money under three categories: money that is stolen (systematic corruption as a way of life in Chicago, and the massive settlements for police malfeasance); money that is hidden (massive amounts of TIF money and other “slush funds”); and, money that we are not collecting, but should be (getting corporations to pay their fair share and taxing things like financial market transactions). Here’s a link to the podcast of Tresser’s interview with Wayne Bessen. I’ve ordered Tresser’s book. After reading it I may have more to say.
Meanwhile, I expect that we’ll hear more about the impacts of the increases in taxes and fees. And we’ll hear more from Mayor Emanuel on this subject in reaction to outcries from Chicago citizens. And I’ll be listening for the emerging narrative.