CHICAGO — University of Chicago graduate students have come up with the idea of adding tolls to DuSable Lake Shore Drive as one way to address the city’s $35 billion pension liability.
A team of master’s degree candidates from the University of Chicago’s School of Business and Public Policy recently Harris Policy Innovation Challengeasked students for comprehensive suggestions on how to address Chicago’s pension crisis.
The city is facing about $35 billion in payments over four pension funds promised to employees, including retired firefighters and police officers. A new state law requires the city to fund 90% of those pensions over the next 30 years. According to WTTW.
Saeed Ahmad, a first-year master’s student at the University of Chicago, formed a winning team to share a $10,000 prize to approach the problem by “bringing ideas from the private sector to the public sector.”
The students’ most audacious proposal is to add a 75-cent fee to DuSable Lake Shore Drive on the north side.
“The funding will have to come from somewhere,” Ahmad said. “You might not like tolls, but raising property taxes, sales taxes, or increasing progressive income taxes is probably preferable.”
The team also recommends deregulation of marijuana licenses to increase the number of dispensaries in the state and the tax revenue they generate.
“The price of legal marijuana is still much higher in Illinois compared to other areas. Maybe there are enough dispensaries in Logan Square, but not enough people selling marijuana,” Ahmad said. “States need to increase licenses to increase supply, which will drive down prices and encourage more people to legally purchase cannabis.”
The panel of financial experts and civic leaders reviewing the students’ proposals included current and former executives from Netflix, the Art Institute of Chicago, Chicago Community Trust, CBRE Investment Management and the university. Ahmad’s team received the following advice: Jack Broughmana former deputy chief financial officer for the city who has worked on pension payments.
The winning team’s core proposal would also put more resources into marketing the city’s vacant land and pitching it to investors, as well as bring pension contributions for police and firefighters in line with the city’s two other funds. The plan is to raise the tax rate to 11.5%.
Further proposals include revamping the process for collecting outstanding national debt. Securitize new forms of city tax revenue. Use an actuary to set the city’s annual contributions. Mr. Ahmad said he would create new tiers of pension payments based on years of service and consolidate the pension investment arm under the most profitable firefighters.
In total, the proposals would bring the city between $200 million and $400 million a year, Ahmad said.
Six of the nine proposals would require state legislation to clear the way for the city. Ahmad said his team would be “happy to talk” with Mayor Brandon Johnson and Gov. JB Pritzker.
Neither Mr. Johnson nor Mr. Pritzker’s office responded to Block Club’s requests for comment.
“With a four-year term, Mayor Johnson will be able to move the ball on all of these fronts. Everything will be moving toward completion,” Ahmad said. “But if he has other priorities…we’re talking about improving processes and changing the way bureaucrats do their jobs. Certainly it’s jobs.”
Poor early returns and uncertainty are currently swirling around over former Mayor Lori Lightfoot’s signature plan to use tax money from the city’s pension fund to support the opening of a riverside casino.
Ahmad said there is no “silver bullet” to solve Chicago’s “big problems.”
“The city is dealing with the immigration crisis, the homeless issue, the things they need to spend money on,” Ahmad said. “But with $35 billion in debt looming, that’s more difficult to do.”
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