Chicago earns an F in new fiscal report card
A new study shows the Windy City’s financial troubles persist, despite a series of tax increases.
The latest comes from the watchdog group Truth in Accounting, or TIA, and details Chicago’s distressed fiscal condition. To illustrate the severity of the city’s fiscal problems, the organization awarded Chicago an F grade.
“Despite an array of tax increases to help shore up the city’s underfunded pension plans,” the study declares, mounting pension and benefit debt has committed the city to a perpetual cycle of worsening fiscal instability.
TIA’s analysis, which was produced using data sourced from the Chicago’s 2016 Comprehensive Annual Financial Report and actuarial reports from the city’s pension funds decorates Chicago with the status of a “sinkhole city” – a city whose deficits outpace its available assets – noting that every taxpaying Chicagoan is on the hook for $41,700 in city debt.
To put this in perspective, median household income in Chicago is roughly $48,500.
City officials have made irresponsible financial decisions predominately in relation to public employee pensions and other retirement benefits that have continued to rise out of proportion with residents’ ability to pay.
More perverse, the analysis finds, is the deceptive bookkeeping practices the city employs to conceal the full extent to which its finances are truly underwater. While the study remarks that Chicago’s pension debt is dutifully reported, per the implementation of a recent transparency law, the level of unfunded retiree health care obligations has been dramatically downplayed.
“These statistics are jarring, but what’s more alarming,” the analysis notes, “is that city government officials continue to obscure significant amounts of retirement debt from their balance sheets, despite new rules to increase financial transparency.”
The TIA report found $548.3 million in total debt omitted from the city’s balance sheets. The city needs more than $37 billion just to pay its bills, according to the analysis.
Taxpayers, who pay the salaries of the officials culpable for such mismanagement, will continue to suffer from this dysfunction.
Record tax hikes have failed to rescue the city’s finances from this downward spiral. Yet the city’s recently passed 2018 budget signals more of the same: a continued dependence on the incomes of overtaxed residents and a preference for quick-fix gimmicks over substantive spending reforms. Until the city – along with its sister governments – can come to terms with its structural debt spiral, failing letter grades will be the least of its worries.