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.
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.
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.
“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.
Letter sent Tuesday by 15 alderpeople to Mayor Brandon Johnson
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. “We were told we would get reimbursed. Now that we’re not getting reimbursed, you have to come back before us.”
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.
“There needs to be a full public accounting brought into the City Council about exactly how this is being done, so everyone is satisfied it does not cross any of these red lines that require City Council approval.”
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.”
Ald. Jason Ervin, (28th), Johnson’s handpicked Budget Committee chair, once again characterized the pension problem as “an accounting transaction” that does not require Council action.
“This is stuff that’s already happened. There’s nothing to do. What is there to approve? There is no money to move. It is a hit to the fund balance because it is revenue that was anticipated that did not come in,” Ervin said Tuesday. “There was spending authority for this. It just did not happen.”
Johnson balanced his $17.1 billion budget on the assumption that CPS would reimburse the city for the $175 million pension payment using some of the $311 million in funds generated by the mayor’s decision to declare a record, $570 million tax-increment-financing (TIF) surplus — with 54% of that money earmarked for the public schools.
“I don’t think it was a wing, a prayer or anything like that,” Ervin said, defending the mayor’s assumption. “If you look at it historically, this is something that happened for the past several years. It was something they agreed to do. It’s something that they welched on.”