By Dave McKinney and Karen Pierog

By Dave McKinney and Karen Pierog


CHICAGO (Reuters) - Chicago Mayor Rahm Emanuel moved this week to bolster his sagging political fortunes, delivering within a few hours both a labor pact with the city's teachers and a no-drama 2017 city budget devoid of any big tax hikes.


On Tuesday morning, Emanuel unveiled a $9.8 billion city spending plan for fiscal 2017 that includes $3.7 billion for operations, relying on $82.3 million in revenue growth, savings from efficiencies and a few one-time measures.


Since winning re-election last year, the Democratic mayor has been dealing with racially charged fallout from the 2014 police shooting of a black teenager and the pension-driven financial hardships facing the city and its school system.


"It is a budget free of an immediate pension crisis, free of the black cloud of insolvency threatening the retirements of city employees and the financial future of Chicago," Emanuel told the city council.

Twelve hours earlier, he signed off on a four-year tentative contract deal with teachers in the country's third-largest public school system to avert what would have been a third strike in four years. The pact, which still must be ratified by the Chicago Teachers Union, relies on a bigger injection of surplus revenue he controls from the city's development districts.

To be sure, the spate of good news for Emanuel does not mean the mayor is free of political trouble.

In 2016, Emanuel reeled from the effects of street protests stemming from the death of unarmed, 17-year-old Laquan McDonald, whom a white police officer shot 16 times. Emanuel’s administration kept a police video of the killing under wraps while he ran for re-election last year.

More broadly, street violence in Chicago continues unabated, leaving the city with more murders this year than New York City and Los Angeles combined. The city budget Emanuel outlined accommodates the initial phase of a two-year plan to add 970 police positions to address the city's sharp spike in violence.

“Until we see the focus on crime in the city and the policing issue from the mayor in more ways than we saw this summer, which was not a lot of focus until it was absolutely necessary, that’s one of the biggest issues in the city,” said Alderman Scott Waguespack, an Emanuel critic and member of the city council’s progressive bloc.

Financially, the city has faced a series of credit rating downgrades due to an unfunded pension liability that Moody’s Investors Service has said is the highest among U.S. municipalities it rates. That liability stood at $33.8 billion at the end of fiscal 2015 for Chicago's four retirement systems.

The mayor last year pushed through a $543 million phased-in property tax increase for police and firefighter retirement systems. The city enacted a new tax on water and sewer usage last month to rescue its largest pension fund for municipal workers from insolvency.

A Chicago-based government finance watchdog group welcomed Emanuel’s budget blueprint on Tuesday. “Generally, our initial reaction to the mayor’s plan is this is a good-news budget for the city of Chicago," said Laurence Msall, president of the Civic Federation.

Emanuel’s top city council ally, Alderman Patrick O’Connor, said the mayor is making solid progress in digging Chicago out of its fiscal and social mess. But no one is saying it yet amounts to a platform for a possible third term in 2019, which the mayor has not yet ruled out.

“There are ebbs and flows to popularity. There are ebbs and flows to crisis,” O’Connor said. “Who knows what the crisis of the day is going to be a year from now or two years from now?”

(Editing by Matthew Lewis)