Someone, someday, will ask you when the financial downfall of Chicago began. Your answer: Dec. 30, 2010. On that date, Gov. Pat Quinn signed into law a requirement that the city — and all other local governments in Illinois — raise property taxes in 2015. Why? To get pension funds for police and firefighters 90 percent funded over the next 25 years. Today, Chicago's funds are a skimpy 34 percent funded.

I wholeheartedly endorse properly funding pension funds for city retirees. The question is how we do that. The Mayor's Commission to Strengthen Chicago's Pensions, which I co-chaired, has recommended that Chicago fund its pensions to at least 80 percent of their obligations within 50 years.
But the bill that legislators passed — under pressure from police and firefighter unions — and Quinn signed is a dangerous way to fix our pension shortfall and needs to be repealed: Forcing Chicago property taxpayers to foot the entire cost of rescuing these funds, and making them do so in only 25 years, is patently unfair.
Here's the impact on a typical homeowner, who today pays about $3,000 a year in property taxes on her bungalow. Work the math and you find that amount rises to $3,413 for 2015 taxes, payable in 2016. Now let's assume the "me-too'ers" at the laborers' and municipal workers' pensions have the same legislation enacted for their benefit. That's another $413 per year on the homeowner's tax bill, for a total of $3,826. If Chicago Public Schools teachers win the same deal from Springfield, the tax bill jumps to about $4,370.

At that point, Chicago will cease being the value proposition that, today, still attracts people to this city.

That's the real-world, practical threat from this new law. Here's the real-world, fairness problem:

As the employers of city workers, Chicago taxpayers already contribute almost $450 million annually to four pension funds. Employees contribute some $285 million. Both of those contribution levels need to rise. Had nothing been done, all of the four Chicago funds — fire, laborers, municipal employees and police — would literally run out of money by 2027 at the latest. The fire fund could survive until 2019 — if you assume it could earn an unrealistic 8 percent return on investment. Drop that to a more likely return of 2 or 3 percent and the fire fund would have been exhausted in 2017.

However, something has been done. The law Quinn signed requires the city to greatly increase its property tax levy in 2015 — to the exclusion of any other possible funding source. If this law stands and Chicagoans find a way to pay all that money, then the police and fire funds will indeed rise to 90 percent funding by 2040 or so. How much money? This will mean adding an annual $550 million to the $450 million taxpayers already contribute to the two funds. That's a cool $1 billion pension contribution that City Hall — or rather, city property owners and only property owners — will have to pay starting in 2016. The employee contributions remain at roughly $285 million.
This flies in the face of the pension commission's conclusion that any fix needs to be a shared burden. That means asking both employers (Chicago taxpayers) and employees to contribute more, among other measures to prolong the life of these funds.

What's puzzling is why the new law places no added burden whatsoever on the employees. To its credit, organized labor — during the commission's deliberations — didn't rule out discussing increases in employee contributions in the context of shared sacrifice. However, neither Quinn nor Senate President John Cullerton in their legislation asked for any sacrifice from the police and firefighters.
We need to repeal this law and launch negotiations between City Hall and its workers on how to salvage pensions. None of us — especially our future mayors — will want to see the terrible consequences if this law survives.

Dana Levenson, former chief financial officer for the city of Chicago, is an investment banker. He co-chaired the Mayor's Commission to Strengthen Chicago's Pensions.