Three things you need to know about Chicago’s budget
Chicago officials are reviewing the state of the city’s finances in preparation for a months-long budgeting process – and the numbers aren’t pretty. The city of Chicago released today its 2013 Annual Financial Analysis. As this document reveals, growing debt payments and unfunded pension liabilities continue to push the city’s budget into the red. As this...
Chicago officials are reviewing the state of the city’s finances in preparation for a months-long budgeting process – and the numbers aren’t pretty.
The city of Chicago released today its 2013 Annual Financial Analysis. As this document reveals, growing debt payments and unfunded pension liabilities continue to push the city’s budget into the red. As this trend continues, fewer city resources will be left for Chicago to provide core government resources.
Here’s what taxpayers should know about the 2013 analysis:
- The budget deficit could grow to $1.53 billion in 2016: Authors of the budget analysis used three different scenarios to project budget gaps. They write that, “Even under the most optimistic projections, the city will continue to experience a sizable operating budget shortfall for several years.”
The projected budget gap for 2014 is $338.7 million. Under the city’s baseline projection, that number could grow to $1.16 billion in 2016. But under less rosy assumptions, Chicago’s budget gap could grow to more than $1.53 billion in 2016.
- Chicago’s outstanding debt exceeds $20 billion: Debt is a fundamental driver of Chicago’s budget woes. The city had $12.8 billion in outstanding long-term debt in 2003. That debt grew to more than $20 billion by 2013. However, the city projects this number to fall in the coming years.
Payments on the long-term debt have also grown over recent years. In 2003 the city’s long-term debt service payments totaled $742 million. By 2013 the city’s debt service payments had nearly doubled, reaching $1.44 billion. And those payments are expected to grow to $1.62 billion in 2016.
- Chicago’s unfunded pension liability could grow to $24.5 billion by 2017: Pensions are another fundamental driver of Chicago’s budget gap. Together, the city’s four pension systems are only 36 percent funded. The current unfunded pension liability stands at a staggering $19.5 billion and is expected to grow to $24.5 billion by 2017.
Due to legislation passed by Illinois in 2010, Chicago’s pension contribution will grow to $1.1 billion in 2015 up from $483 million in 2014. The law requires Chicago to contribute an actuarially-determined amount sufficient to bring the PABF and FABF to a 90 percent funding level by 2040.
Chicago cannot afford to continue down this path of growing debt payments and ballooning pension liabilities. The city’s recent triple downgrade and steady out-migration mean that fewer residents will be forced to bear the brunt of these budget woes.