A bit of positive news on Chicago's fiscal front. Mayor Rahm Emanuel says the city's been able to slash its budget deficit by about half over the past year. Does that mean it’s all smooth sailing for city finances in the years to come? Not by a longshot. First, Budget Director Alexandra Holt has about three months to close the remaining $369 million deficit for the coming year.
“It starts today. It starts today in a couple of ways. One, it’s the engaging with the public and engaging with the aldermen about their ideas on how we get the deficit closed,” said Holt. “ChicagoBudget.org, which is our website where last year we sought ideas and got a lot of really great ideas from the public, opens today as well. Again, seeking that solicitation. And then on the behind-the-scenes perspective, my office has started working with the departments identifying those places where we have efficiencies, looking at each and every service, and looking for where those cost-savings opportunities will be.”
But the city has its work cut out for it beyond 2013. According to city numbers and assuming the economy keeps up its current pace, the deficit rises to $466 million in 2014 and $580 million in the following year.
“The mayor is going to have to achieve real savings in all of city government,” said Laurence Msall, director of the Civic Federation. “In particular, the fire department and police department are going to have to be part of that solution.”
“We’re in negotiations right now,” said Holt. “What the outcome will be is still to be determined.”
Police and fire cuts are politically fraught; both departments are operating without a contract as they negotiate.
The most startling numbers involve pension payments for city workers. State law is mandating that the city increase its pension payments to get to a full level of funding. Right now, they are collectively less than 40 percent funded.
In order to do so, the city will have to pay $479 million in 2013, $466 million in 2014, before skyrocketing to$1.2 billion in 2015. And the payments only go up from there.
“In order to accommodate that large of a pension contribution increase, the city would have to either double its property tax levy or make significant reductions in other areas of city government,” said Msall. “Both of those things would be difficult politically and financially to achieve.”
The only way out of this, then, is through Springfield. Mayor Emanuel has been there lobbying the state to reform pension law to reduce benefits for employees going forward. The budget department says they’ve gotten a promise from state leaders that the issue will be taken up in the veto session, once statewide pension issues are ironed out. The deal would involve raising the retirement age, reducing yearly cost of living raises, and even suspending them outright for 10 years, and offering more employees a choice to opt into a 401K-type plan.
Not included in the budget is money owed to investors through the infrastructure trust. But the regular debt consumes about 20 percent of the budget. Next year debt payments will cost taxpayers $1.5 billion; $1.6 billion in 2014; and $1.5 billion in 2015. This is assuming no NEW debt is issued.
Infrastructure Trust board members will have their inaugural meeting on Thursday morning at the Cultural Center.
Visit the PDF below to view the City of Chicago's 2012 Financial Analysis, and watch the following video for The First Year in Review.
Watch Chicago Tonight at 7:00 pm for more on the city's budget.