Rising personnel costs and retiree benefit payments have driven Chicago’s projected fiscal year 2010 budget shortfall to between $500 million and $1 billion, according to city officials. The Chicago Tribune reports today that the parking meter lease proceeds—which injected over $1.1 billion into city coffers—are playing a critical role in helping the city weather the fiscal storm:
Mayor Richard Daley’s administration Thursday predicted a gaping hole in next year’s budget that will eclipse the current financial problems — even after the city exhausts its brand-new $320 million rainy day fund.
The anticipated $6.2 billion budget for next year could be more than half a billion dollars in the red because of plummeting tax collections and rising wages that account for more than 80 percent of the city’s day-to-day spending, said Chief Financial Officer Gene Saffold. He announced the gloomy prediction as Daley aides began briefing aldermen in anticipation of public hearings next month.
Although higher taxes are “a last resort . . . nothing is ruled out at this point,” Saffold said. “The mayor has instructed us not to look at property taxes as we move forward in 2010.”
Daley has laid off city workers and pressured unions to take unpaid days off to save money this year, and aldermen and outside budget experts predicted that personnel cuts were likely next year. The biggest chunk of increased spending next year will come from $117 million in higher wages, benefits and pension fund payments, Saffold said.
“You have to look at personnel and personnel reductions because they represent 80 to 85 percent of the operating costs,” said Laurence Msall, executive director of the Civic Federation. […]
Daley has been credited with bolstering city finances by innovative leases of public assets such as the Chicago Skyway. But after taking a public drubbing for the problem-plagued lease of city parking meters, the mayor will count heavily on one-time revenue from that deal — including all of the rainy day fund — to offset next year’s bad news.
As a reminder, Chicago split the proceeds from the parking meter agreement in four ways:
- $400 million was placed into a long-term reserve/revenue replacement fund, bringing the city’s total long-term reserves to $900 million.
- $325 million is being used for mid-term budget relief through 2012, with $150 million drawn down thus far to balance the city’s fiscal year 2009 budget.
- $320 million was placed in a budget stabilization (“rainy day”) fund.
- $100 million was placed in a human infrastructure fund used to supplement the budgets of a variety of low-income support programs for a five-year period.
For more on parking meter privatization, see here, here, here, here, here and here.
“ Reason’s Privatization Research and Commentary
“ Reason’s Transportation Research and Commentary