Emanuel's Pension Plan Backs Legalized Marijuana, Chicago Casino, Constitutional Amendments, More Borrowing

CHICAGO (CBS) -- Mayor Rahm Emanuel is sounding the alarm on the city's looming pension crisis, and is asking state lawmakers to legalize recreational marijuana, authorize a Chicago casino, and approve changing the state constitution to help address the problem.

Although he is leaving office next spring, Emanuel knows funding the city's pension systems will be a major challenge for his successor, with pension payments spiking by $1 billion by 2023.

The mayor stood before aldermen at City Hall on Wednesday, offering his ideas for how to solve the city's pension problems.

Emanuel called on state lawmakers to approve legislation allowing for recreational use of marijuana, a plan also backed by Gov.-elect J.B. Pritzker. The mayor also wants state lawmakers to expand casino gambling in Illinois, including a land-based casino in Chicago, something Emanuel has sought since taking office in 2011.

The mayor wants revenue from both legalized pot and a Chicago casino dedicated to pensions.

"We will dramatically reduce what is asked of our taxpayers to meet those obligations over the next four years. We will meet our goals on both stabilizing Chicago's pension funds and asking the least amount from Chicago taxypayers," he said.

In addition, the mayor called for two major changes to the Illinois Constitution to make it easier to address the pension crisis.

"Amending the state constitution to allow for both a progressive income tax and new agreements with labor is an important step towards fiscal stability and progressivity," Emanuel is prepared to say, according to excerpts of his speech released by the mayor's office.

The Illinois Constitution states public employee pension benefits "shall not be diminished or impaired." As a result, the Illinois Supreme Court in 2016 struck down Emanuel's plan to bail out two city pension funds by cutting benefits and requiring workers to pay more towards their retirement. A year earlier, the high court also struck down separate legislation to scale back pension benefits for state government workers.

The state constitution currently allows only for a flat income tax, where every person pays the same tax rate, regardless of income. The mayor and Pritzker both want to change the constitution to allow for people at higher income levels to be charged a greater income tax rate.

To change the state constitution, three-fifths of both the House and Senate would have to approve putting he measure on the ballot. Voters would then decide whether the proposed amendments would be approved. The earliest that could happen would be 2020.

Emanuel also proposed borrowing up to $10 billion by selling pension obligation bonds, which would allow the city to finance part of its existing $28 billion pension debt at a lower rate. The mayor believes the plan would reduce the burden for taxpayers by $6 billion to $7 billion over the next 40 years.

"We would save Chicago taxpayers as much as $200 million in the city's next budget, without creating any more total debt than we have today," he said.

However, some financial experts believe that plan is too risky, and several candidates for mayor have rejected that plan.

Chicago taxpayers already dealt with a massive property tax increase over the last few years, and several other increases in taxes and fees to increase the city's pension payments.