‘Magic happens’: The illusion behind Lightfoot’s 2023 Chicago budget – Wirepoints

By: Ted Dabrowski and John Klingner

Chicago’s structural budget problems and the city’s deeply underwater pensions should be a big deal this mayoral election, but they haven’t been and they won’t be. 

Chicago’s tax coffers are overflowing right now as a result of the billions in federal Covid aid that’s come into Illinois, and that’s allowing the city’s fiscal mess to go largely ignored. There’s so much money sloshing around, in fact, that Chicago Mayor Lori Lightfoot recently said the below and pretty much got away with it:

“Here’s the headline, folks: Hard work pays off. When we apply fiscal discipline, invest in ourselves and our people and our places, and we put ourselves on stable financial footing, that’s when the magic happens,” Lightfoot said. “Because we can afford to make those investments that are necessary to uplift our young people, solve the social ills that have plagued us for way too long, and keep our economy going. But it starts with getting our fiscal house in order, and I’m here today to tell you that’s exactly what we have done.”

Fiscal discipline? Stable financial footing? Fiscal house in order? Magic, even? Hardly. 

The reality is Chicago’s financial problems haven’t gone away. They may even be deeper than ever before when you take into account the social, demographic and economic impacts of the last three years that have yet to fully play out. Here are five things that make Lightfoot’s talk of “magic” nothing more than an illusion.

1. If there’s any “magic” at all in Chicago, it’s the “free” federal money that’s rained on Chicago over the last three years. Officially, the city received about $1.9 billion in direct aid. But that’s only a fraction of the whole. Nearly $200 billion in covid aid has gone to individuals, companies and governments in Illinois as a result of the many federal bailout programs. The airlines have gotten $17 billion. Participants of the paycheck protection program, $38 billion. Unemployment benefit beneficiaries have received $25.5 billion.

All that money is being spent and it has generated an unprecedented amount of city and state tax revenues.

2. Chicago’s budget has ballooned as a result of the bailouts. Chicago will spend $16.4 billion in 2023, a whopping 50 percent more than the $10.6 billion in pre-Covid 2019. More specifically, the city’s operating fund will have $1.6 billion more than just four years ago, or 42 percent more. And city has $2.8 billion more in grant funds, a massive 154 percent increase.

Again, that’s far more to do with the fed’s money than anything Lightfoot did.

Those increases are grossly out of line with the city’s underlying economy and Chicagoans’ spending power. By comparison, the city’s total spending grew by only 16 percent over the previous 4-year period of 2015-2019.

3. The sustainability of Chicago’s revenues is a big question. Just look at some of the budget’s individual revenue items. Sales taxes, up 87 percent since 2019. Transaction taxes, up 84 percent. The PPRT and internal service earnings are up a whopping 100 percent. And charges for services are up 160 percent.

The underlying economy hasn’t grown like that and once the federal money is gone – and a likely recession arrives – does the bottom fall out of all these numbers? It’s hard to predict, but it’s hard to see how those tax revenues remain at such elevated levels.

4. Chicago still has the nation’s worst credit rating for a big city, with the exception of Detroit. Lightfoot is trying hard to take credit for the city’s recent credit upgrades, but the increases are all due to the federal bailouts, not her actions. And yes, while the city is no longer “junk” rated, Chicago is still the nation’s worst-rated major city besides Detroit.

5. The city’s broken pension systems remain a huge problem. In the same breath that Lightfoot congratulated herself for getting the city’s fiscal house in order, she also urged the “General Assembly to do its share to bail out city pension funds,” reported the Sun-Times. So much for “better finances.”

The city’s pension crisis hasn’t gone away. Chicagoans are burdened with $34 billion in debt, the worst among the nation’s biggest cities. And at less than 25 percent funded, the systems are no longer secure for the city’s police, fire, municipal and laborer retirees.

Chicagoans aren’t on the hook for just those city funds. They’re also stuck with another $13.2 billion in Chicago teacher pension debts, as well as their share of Cook County’s pension shortfalls. And it doesn’t end there. Moody’s, which runs more conservative numbers, calculates Chicagoans debts are about double what the state and city’s official numbers say: nearly $100 billion.

In the absence of pension reform, the only way to get that kind of money out of Chicagoans is through massive tax hikes.

Nobody has any idea yet just how damaged the city really is.

What’s fascinating about Mayor Lightfoot’s brags, much like Pritzker’s, is just how little positive influence she’s had on the city’s finances. On the contrary, she led some of the nation’s strictest big-city covid lockdowns. She failed to take an early stance against the city’s riots, letting the Loop get smashed up before finally responding. And she’s continually given in to the city’s radical labor unions like the CTU, increasing the costs on tapped-out Chicagoans.

Her policies have contributed to half-empty corporate buildings and even emptier trains and buses, an upsurge in crime that has yet to be controlled and increasingly failing, empty schools and dismal student outcomes. All that negatively affects the city’s population, jobs climate, tourism and ultimately tax revenues. 

The big remaining question is, how big of a “withdrawal” will Chicago have once the “magical” federal money is gone?

Read more from Wirepoints:

• Chicago 2022 arrest rates collapse to just 5%
• Chicago’s New ‘Social Bonds’: Limited Time Special Offer!
• The CTA ran near-empty trains and buses during the pandemic – and it’s still struggling to fill them. Now it wants higher taxes on Chicagoans to pay for that mismanagement.
• Chicagoland has nation’s 4th-worst metro unemployment rate