As pension obligations faced by local governments continue to put the squeeze on budgets in California a cautionary tale is playing out in Illinois – a reminder of Proposition13’s value to California taxpayers.
Chicago Mayor Rahm Emanuel said in a speech last week if state lawmakers do not pass pension reform the city’s next budget would “either double city property taxes or eliminate the vital services that people rely on.”
The Chicago predicament arose because of a previous attempt at reform. Under that law, a second tier was started for new public safety hires requiring a later retirement age, caps on pension formulas and an end to pension spiking. However, in exchange cities were required to fully fund pensions.
With Chicago officials directing tax dollars toward services, they reduced payments to cover generous pension obligations, which are not nearly fully funded. Now property taxpayers could be on the hook for huge tax increases.
Proposition 13’s property tax protections prevent local property taxpayers from being held hostage to out-of-control government spending.
That’s not to say that California local governments don’t have a pension problem. City budgets in the Golden State are feeling the same squeeze as in Chicago. Andrew Ross’s column in the San Francisco Chronicle points out for example: “Pension costs as a percentage of a city’s general fund: San Jose, Oakland and Berkeley are Nos. 3, 4 and 5 in the nation, respectively (ranging from 30.9 percent for San Jose to 26.1 percent for Berkeley).”
Imagine the pressure to raise property taxes in those cities if Proposition 13 were not on the books.
This cautionary tale also gives you an idea why there are forces out there dedicated to undercutting Proposition 13 and why they must be resisted.