Peanuts. That’s what you’d think it would take to stabilize Chicago’s fiscal situation if you relied on a Reuters story last week.
Chicago’s budget gap, the article says, “has been shrinking since hitting a high of $654.7 million in fiscal 2011…. The city is projecting a $114.2 million shortfall in fiscal 2018….”
Looks like great progress and nothing a little tax increase wouldn’t fix. No wonder many folks think that way.
But let’s look at actual results based on the city’s audited financial statements. Here’s what Bill Bergman at Truth in Accounting wrote in July upon release of the most recent statements:
After a string of bottom-line (change in net position) losses of roughly $1 billion a year from 2011 to 2014 (losses that arose despite regular claims to ‘balanced budgets’), Chicago posted an especially grueling loss of about $5 billion in 2015. Last year, things ‘improved.’ Chicago ‘only’ had a $3.6 billion decline in its reported net position….
Much of that discrepancy is because government “budgets” mean almost nothing since they ignore growing unfunded pension liabilities, which are the lion’s share of Chicago’s problem. The discrepancy also derives from changes in accounting standards and assumptions about pensions, but that’s really just an admission that previous reports didn’t fairly present financial results.
There’s just no reason to talk about past performance by referencing budgets when actual financial statements are available. And I’m not clear where Reuters’ budget numbers came from anyway since Rahm claims to have fully balanced budgets year after year.
The reporter on the article was Karen Pierog. We’ve criticized her before for repeating the “80 percent funding myth” about public pensions. That’s the notion that a pension is healthy if it has 80% of what it needs, propagated by politicians hoping to understate the problem and reporters in an echo chamber. In fact it’s a myth, according to the American Academy of Actuaries. Pierog is a repeat offender in the “Hall of Shame” kept by actuary Mary Pat Campbell of reporters and politicians who repeat the myth.