Out of Control Policy Blog

Next Stop on the Budgetary Crisis Express: Chicago, IL

Early Wednesday morning, Illinois lawmakers took a shot at solving the state's budgetary crisis the best way they know how: raising taxes. A lot. As a native of Chicago, I had a hunch that things in my hometown (run by a single family for 42 of the last 55 years) could not possibly be in better condition than the state as a whole. Indeed, according to a report released by the Civic Federation, a Chicago-based non-profit:

The City of Chicago faces significant challenges to its fiscal stability: a structural deficit, enormous unfunded pension liabilities, and a growing bonded debt burden. Large and growing budget deficits have been a problem for the City since FY2007.

[...]

Between FY2005 and FY2009 City expenses grew at over twice the 8.1% rate of inflation while the city’s tax revenues grew by only 6.5%. Clearly, Chicago’s budget trend is not sustainable. If the City does not stop deferring necessary but difficult changes to its spending, hefty tax hikes and/or enormous budget cuts will be needed to balance the budget when one-time revenues have run out.

These "one-time revenues" are the funds gained from selling the city's parking meter system and the Chicago Skyway, a toll road leading from the city to Indiana, to private operators. According to the Federation, 80% of that money (earned less than five years ago!) has now gone to paying down the city's deficits over the last few years.

Another persistent problem: the disconnect between city employee compensation and reality. As the Federation report notes, "the largest expenditure in the budget, appropriations for personnel, increased by 9.2% between FY2007 and FY2011 despite a reduction in the City’s local funds workforce of 2,945." A look at the 2010 city budget, which itemizes almost every expenditure for every arm of city government, including salaries, hammers the point home pretty clearly: yes, city workers are raking it in hand over fist. A few highlights...

- $30.68 per hour (about $64,000 per year) for a "Sanitation Laborer" in the Dead Animal Recovery division of the Department of Streets & Sanitation.

- $28.21 per hour for a sign hanger and about $39.03 per hour for bricklayers in the Department of Transportation.

- $32.95 per hour for truck drivers in a variety of departments.

It's not a big surprise that the city, between its reckless spending habits and its $81,000 a year bricklayers, is struggling to pay its debts. Then, of course, there's the $12.4 billion in unfunded pension liabilities that will continue to accrue even as revenues return to pre-recession levels.

Of course, it's not as if the city government has failed to find new and creative ways to raise revenue. One example is the city's excise tax on bottled water, the first of its kind in U.S. history when it was introduced in 2008, and which has still failed to meet the city's revenue expectations. These sorts of gimmick measures and one-time windfalls like the sale of city assets are not going to stop the fiscal pain when it finally strikes Chicago. The only hope is that it deals with these issues in a more sustainable, growth-friendly manner than its counterparts in Springfield.

David Godow is Research Assistant


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