By: Ted Dabrowski, John Klingner and Mark Glennon

Chicago on Monday released its budget forecast for 2021 accompanied by an address from Mayor Lori Lightfoot. The forecast and speech are part of the annual run-up to completion of the coming year’s budget.

Illinois faces a “seismic disruption” of its economy, Lightfoot said. Unfortunately she offered no seismic response or reforms, just vague aspirations and stronger rhetoric.

Let’s look at some of the key things the report and Lightfoot said and break them down:

  • The budget shortfall – the “official” one – will hit $800 million this year and $1.2 billion in 2021.

In truth, nobody knows how bad the shortfall will get because we have no idea how long other things will persist, including riots, the pandemic and the city’s response to the pandemic in the form of lockdown rules. Nor do we know how quickly flight from the city will accelerate.

  • The “seismic disruption” of Chicago’s economy means 2021 requires a “pandemic” budget. “Also affecting the recovery was looting and damage to our businesses that occurred three months ago and again more recently,” she said.

That’s certainly true, but what changed since April? Then, she said, “I think we’re very well-situated to weather this storm because we anticipated in our budget forecast for 2020 that we would experience in this year some kind of economic downturn…. Now, nobody anticipated that it would be due to a pandemic. But we built the budget this year to be able to be responsive to that kind of worst-case scenario.”

The seismic disruption was clear long ago, but no aggressive steps were taken to address it, and Lightfoot announced no new ones.

And what kind of “pandemic budget” in a city with a shrinking population that was already broke calls for a spending increase of over 11%? That’s the projected increase from 2020 to 2021 shown in the report.

It’s a similar story for Chicago schools, which have a separate budget. CPS spending is set to go up by 7 percent in 2021.

  • Property tax increase, layoffs and furloughs? Maybe, but she said those “are at the end of my list of tools and options.”

Layoffs and pay cuts should have been implemented years ago.

Budget steps will probably include use of federal stimulus funds, another $100 million in savings from debt refinancing and further unspecified cuts and borrowing. An increase in the lease tax on computer leases and cloud services appears likely.

However, she claimed that the budget will include contingency plans if federal money does not come through. How? What? We don’t know yet.

And will the savings from refinancing be a one-time gimmick again? Last year, Chicago took cash upfront for the entire savings from refinancing certain bonds. That provided immediate relief but accomplishes nothing for the future, and is no doubt part of why the new analysis shows “financial costs” jumping by a huge $279 million.

  • More money from the state: “We will also need our fair share of revenue from Springfield, starting with fully funding the Local Government Distributive Fund.”

Every municipality in the state will be asking for the same from the broke state.

  • Lightfoot on Monday

    Lightfoot brushed off concerns about Chicagoans fleeing, saying, “If we were any different than anyplace else in the country, I’d have even greater concern. But there’s no place in the country that isn’t suffering exactly the same kind of hard choices that we are. The grass is, unfortunately, not greener someplace else.”

Does she expect even a single person to believe that? Chicago was the extreme outlier among big cities long before the pandemic on pensions, credit ratings, finances, home values, and more.

  • Tax increment finance districts — TIFs — will be raided for their surpluses, Lightfoot clearly indicated.

TIF surpluses, however, do not reliably produce recurring revenue. They are little more than slush funds, it’s widely agreed, and how much of a surplus is available is unclear.

  • The crisis requires “reimagining” the city’s workforce, Lightfoot said, and “making needed changes in places that are not being fully utilized during the remainder of this crisis and in our post-COVID-19 world.”

What that means, if anything, is unknown.

  • And then there’s the big one – pensions. Lightfoot said she wants to find real solutions to the pension crisis and make sure all of the funds are sustainable for years to come, but offered no specifics.

Court rulings leave only two options for accomplishing real pension reform – bankruptcy or a constitutional amendment to the pension protection clause. She has ruled out bankruptcy, so why no call for an amendment? Without that, she will get no reform.

Many Chicagoans and reporters seem to be taking solace that annual contributions are moving towards a supposed “ARC” – an actuarially required contribution level. Two of Chicago’s four pensions already have contributions calculated that way.

But that complacency is misplaced. Even with the new funding formulas, and even using the overly-optimistic assumptions pensions always use, the total unfunded liability is expected to rise until 2033. Then, it only drops because the city supposedly will be able to contribute more than double what it does now. Those numbers were shown in the 2019 financial report, but are omitted for some reason in the 2021 report.

******************

The longer Chicago waits to reform, the deeper the financial hole gets. In fact, the new report shows that, though the losses shown in red are surely understated:

Lightfoot talks a lot about Chicagoans having to “sacrifice,” but two groups that have escaped hardship are city workers and Chicago Public School employees. They’ve yet to be asked to pay any price during the city’s self-imposed shutdown, never mind that the people who pay for public sector workers have largely been crushed by the government-imposed shutdown and recent rioting.

What Chicago really needs to do is begin managing its crisis for what it is – an extreme financial emergency, a workout. With Chicago households on the hook for more than $140 billion in overlapping government pensioner debts, the city is effectively bankrupt. City residents will never be able to pay down that amount of debt. And certainly not if the city remains impaired for years.

Chicago must give its residents real relief through spending reforms and major debt reductions – which will take time. But meanwhile, it should do what it can by reining in government worker costs.

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Poor Taxpayer
15 days ago

Just Raise Taxes, double or triple them.
See how that works out.

daves
15 days ago

The democrat cabal/machine currently running Illinois for the last 5 decades, will take this state into economic and social destruction, before ever releasing any power whatsoever. they will not file bankruptcy, as they should, they will just borrow more and more, while citizens flee. this state is destroyed by this vile, horrible political party. anyone voting Democrats is a fool …

Poor Taxpayer
16 days ago

The shortfall is far higher than being reported.
Get ready for taxes to double every 5 years forever.
Only the poor will be able to afford living in Chicago, they do not pay taxes.
Section 8 housing is good.
Illinois “Land of Slavery”

Wolfnight
18 days ago

How telling in today’s employment report that Government ADDED 95,000 jobs last month. Since this plandemic, private corporations and small businesses (like mine) have been slashing costs, staff and restructuring finances just to survive. It now seems that Government working is a good growth business! I would love to know the number of government jobs added in Illinois last month. Washington must never ever bail out Illinois or any other state. The future of the private sector businessman has never been bleaker. We truly are in a two tier society; those living very comfortably on the taxpayer, who by comparison… Read more »

Last edited 18 days ago by Wolfnight
Doug
19 days ago

I’ve been saying on here for years, the fascist corrupt mafia Democrats of Chicago and Illinois will go down the “Scorched Earth Death Spiral” process. They will increase taxes dramatically before ever considering a type of BK and clean slate that would benefit the Tax Payers.

daves
15 days ago
Reply to  Doug

their actions, clearly show you are correct….

Marc Miller
19 days ago

Wowzers! I’m not sure where the state will get the money to give Chicago the magic bail-out they’re expecting. I’m sure this is why the U.S. House floated such a large pandemic bill to help out, but that won’t make it through the U.S. Senate or the White House. Maybe they’re betting big on a Trump loss in November so they can commence to printing even more money. I have seen nothing contributed by Illinois public union workers at all.

Poor Taxpayer
20 days ago

No one has done more for the Florida Real Estate market than the Greed of the Illinois Cop, Teacher and Firemen. Luxury homes for all at young ages. Illinois real estate is in the tank, Florida is going up fast. Greed is good if your on the right side of it. Just ask yourself, if your were age 45 with a $100,000 year Illinois Pension would you stay in the schitt hole Illinois? Florida, no income taxes, low crime and great weather year round. The poor honest hard working taxpayer and their families and screwed big time. Illinois “Land of… Read more »

Douglas
20 days ago

In truth, nobody knows how bad the shortfall will get because we have no idea how long other things will persist, including riots, the pandemic and the city’s response”

I’m seriously considering moving to another planet. Help wanted: Rocket scientist🚀

Illinois Entrepreneur
20 days ago

They are going to run this until there is literally no money in the bank, ala Harvey. They have no ability to plan or make hard choices — the public sector unions won’t allow it.

A day will come when they can’t make payroll, and then they will run late on check disbursements to vendors, along with massive layoffs and tax increases.

I literally hate these people for what they have done to this city and state. Every one of them disgusts me.

Eugene from a payphone
20 days ago

The way out is to pay out the contracts for as long as the money lasts and then close things down and reorganize completely. The Unions will scream but the PATCO members screamed too and they’re still gone and the planes are still flying.

Mark Felt
20 days ago

Remember when Romney ran against Obama and the political pundits said no incumbent president has ever won reelection when unemployment was over 7%? Well you are currently watching Democrats following that plan as it is all they have with a such a mediocre candidate running.

daves
15 days ago
Reply to  Mark Felt

mediocre ? he is a senile old tool of the political establishment…terrible candidate.

Governor of Alderaan
20 days ago

The Democrats are trying to maximize the death toll and economic damage. They think maximizing suffering will improve Senile Joe’s chances against President Trump and will build support for socialism

Sir Tom of Northfield
20 days ago

Leftists/Democrats want chaos, collapse, and death. They are the Party of Satan. They are vile sub-humans.

James
20 days ago

If you are equating the two terms as you seem to be, then your are talking about more than half of the country as vile sub-humans. Hillary Clinton lost her chance four years ago partly for claiming roughly the same description for Trump’s supporters. Now, one of you has to be wrong or at least wildy exaggerating the problems of the two opposing set of extremists. I’d like to think most voters fit into the middle areas of politics, but of late the violent outbreaks nation-wide does make one wonder about the stability of our nation. Part of the problem… Read more »

willowglen
18 days ago
Reply to  James

Good points James. Ad hominem attacks don’t make anyone persuasive. I really do fault our education system. It has done a poor job of educating young people, and the decline has been steady since the 80’s. One of the remarkable things is that since the Civil Rights advances of the 60’s, the black white achievement gap was closing, so much so that if black student improvement remained linear from the progress late 70’s and early to mid- 80’s we would have no gap today In the late 80’s, progress seemed to stall, and we have vast amount of children (by… Read more »

James
18 days ago
Reply to  willowglen

Educators are no more successful in doing “education” than the communities nor larger societ that they serve allow them to be by the attitudes they inculcate at home and by daily monitoing their child’s progress. Failure on the part of parens to do either of those things almost always leads to no accountability on the part of the child to really care about his progress in school, thinking its irrelevant. The value system of the entire American society has changed drastically since earlier times where scarcity gave people a reason to “get serious” about preparing for life’s adversities at an… Read more »

Locke
16 days ago
Reply to  James

Little Johnny can’t read or calculate because his union teachers are teaching critical race theory indoctrination. In Johnny’s cadre, everyone must get a trophy, because that’s fair.
Little Suzie, over at St. Pats, is taking AP courses, and punished is she steps put of line. Maybe if Suzie studies hard enough, she can unseat Jenny for class Valedictorian at graduation.
A fundamental change occured in the 1960s that will bedevil our soceity for the next 20 years, as this demographic age out, painfully.

James
16 days ago
Reply to  Locke

Yeah, that must be it; educators are spending 90% of their time on social indoctrination, 5% sleeping in class and 5% instructing. How else can one explain it, Einstein?

anonymous
20 days ago

It was so seismic that she went on vacation.

David F
20 days ago

I understood why people wanted to live in Chicago, considering that’s all boarded up, safety isn’t so good, and you can probably work from home. It’s not just the business that won’t renew their lease…. When the layoff’s start, just change the sign to Welcome to the Jungle all there will be left is Animals and Politicians. (hum I’ll let that go 😉

Bill
21 days ago

Time for a forensic audit and a cut-off of all the freebies…

PensionActuary1058
21 days ago

Does Lori really think there aren’t better places to be than Chicago or Illinois? What is she smoking? The grass is certainly greener in Tennessee, Florida, Texas, Arizona, and the list goes on. Even Wisconsin is better, and that is not really a tax friendly state

NopeHope4Illinois
21 days ago

It’s like a minstrel show on the deck of the Titanic.

f j hoenemeyer
21 days ago

A small point :it is not the ‘pandemic’ budget ;it is the shutdown/lockdown budget . Give credit where credit is due. As I said, a small point

Lyn P
20 days ago
Reply to  f j hoenemeyer

“100” That is exactly THE point. I’ve been daily annoyed, for months, by the schmedia, politicons, medsters, and other fraudsters trying to spin all effects Lockdown as “Pandemic” driven. Not one iota true. Government at its strongest… i.e. WORST.

Mike
21 days ago

Estimated payments from the City of Chicago to its pension funds (Fire, Police, MEABF, LABF).

2020: $335.5M.

2021: $426.9M (27% increase over previous year).

2022: $685.3M (61% increase over previous year).

2023: $859.1M (25% increase over previous year).

Three year increase 2020 ($335.5M) to 2023 ($859.1M): 156% increase.

Source: City of Chicago Income Statement – Corporate Fund (see chart in article).

Kay Saroski
20 days ago
Reply to  Mike

FRIGHTENING. If you think the progressive tax will only be affecting those with incomes over $250K, think again. Vote for a change in our state representative or run for a neighboring state.

Mike
21 days ago

Spending is up, revenue is down, shooting is up, population is down, looting is up, safety is down, taxes are up, property value is down.

Tom Paine's Ghost
21 days ago

The one certainty is that Public Sector Union members will be protected and everyone else will be tossed to the garbage.

This is ALL on the Democrat party. Vote these fools out in November in any election race where there is a Republican opponent.

Last edited 21 days ago by Tom Paine's Ghost