Rahm’s Chicago: $1 Billion Financial Shortfall Forecast by 2015
Chicago Mayor Rahm Emanuel released the city’s second Annual Financial Forecast on Wednesday. Not only does the report predict a $369 million financial shortfall for the city's operating "budget" in 2014, but it also predicts a shortfall of more than $1 billion by the year 2015.
In his press release regarding the city’s financial woes, Emanuel bragged, “By making the tough but necessary choices in 2012, we were able to cut our budget gap in half in one year without using one-time fixes... But this will not be done in one year and while a $369 million budget shortfall is a substantial gap, we are continuing to make the difficult but necessary choices as we right the city's financial ship and stabilize its fiscal future."
But, is the city really making the “difficult choices,” as Emanuel claims?
On Thursday, Breitbart News reported the city’s payroll is more than $2.4 billion, with over 2400 city employees (not including school employees) making over $100,000 a year. The payroll is by far the highest expense for the city, yet in the Financial Forecast report, it is expected to increase by $100 million in 2014. No one from city hall is talking about making any cuts to employees’ salaries. A 10 percent across the board cut would cover most of the city’s shortfall for 2014, at least.
It seems, however, little can or will be done to deal in earnest with the greatest problem facing the city’s poorly managed budget—the unfunded pension liability for city retirees.
While Emanuel predicts revenue increases of $466 million and $580 million in 2014 and 2015 respectively, he fails to make any mention of the massive expenditures coming the city’s way in 2015 and 2016.
The city’s forecast report spells out that even the most positive outlook is beyond bleak, and the rosiest possible outcome painted in the report shows a $917.8 million shortfall by 2016.
The pension problem does not lie squarely on Chicago’s shoulders, as stated in the report: “the City’s pension funds are governed by state law.” The state legislature has yet to act, despite a veto-proof Democrat majority as well as a Democrat Governor in Pat Quinn.
From the report:
Even under optimistic projections, the City will continue to experience a sizable annual operating budget shortfall for several years. This is in part a product of the City’s longstanding structural deﬁcit and makes evident the need to continue the difficult process of reforming government to bring operating costs in line with revenues in 2014 and beyond. However, the legacy cost of pension obligations more than doubles the size of the City’s projected gap in 2015 and 2016. Substantive pension reform could significantly reduce the impact of these costs on the City’s budget over the coming years; however, such action must occur at the State level, as the City’s pension funds are governed by state law.
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