By: Mark Glennon*
Man, what a screw up. Mayor Rahm Emanuel yesterday gave Chicago’s annual budget address. The one he gave must have been meant for a different city. All we know for sure is it had nothing to do with Chicago.
I’m thinking maybe it was for Pflugerville, Texas. Don’t laugh. I’ve been to Pflugerville. They have their act together. They even have their own song. Maybe some speechwriter stuck the budget address for another city into Rahm’s teleprompter.
Let’s go through the speech he gave and try to fill in what he no doubt would have said had it been the real one for Chicago.
Rahm: “We will match every dollar in new revenues with at least a dollar in reforms.”
Rahm’s budget calls for over $600 million in new taxes, including over $300 million for the first year in just property taxes, but there’s no word of cuts close to that. His budget identifies just $170 million dollars in savings and reforms. But, hey, hats off to Pflugerville if they are matching reforms with revenues.
Rahm: “For the first time in more than a decade, more people and businesses are moving into Chicago than moving out.“
Chicago’s population grew by 82 people last year. See, this had to be a speech for Pflugerville, where that’s something.
Rahm: “In the past four years, our city’s structural deficit has been cut by two-thirds. That deficit has been reduced with every budget we have delivered.”
The actual results shown in Chicago’s financial statements say the city’s Change in Net Position (which is like Net Income in the private sector) last year was negative $1.165 billion, worse than 2013 and worse than three of the last four years.
Rahm: “In every budget over the past four years we have added money to the Rainy Day Fund. In this budget we will contribute another five million dollars.”
Pflugerville. Gottabe. Five million dollars would be .000641 of Chicago’s budget. Surely Rahm didn’t intend to bring that up as if it’s material. Pflugerville has been in a drought for years, so $5 million should cover them for rainy days.
Rahm: “Our budget will finally begin to reflect the true annual cost of operating the City of Chicago.”
Chicago’s “true annual cost” would have included, oh, say, an additional $2 billion of annual pension cost that doesn’t show up in the budget. (We’ll be writing more about that soon.) Chicago’s real speech undoubtedly would have pointed out that budgets don’t mean much, anyway. They count borrowed money as revenue and are full of other gimmicks. Actual results are entirely different. “True annual cost” doesn’t mean squat in these budgets, as Rahm no doubt intended to tell us.
Rahm: “We in this room [the City Council] today did not create our current challenges.”
Oh, to have a picture of the City Council when he said that, especially Aldermen Ed Burke and Patrick O’Connor. Together they have 70 years or so in the council. Neither they nor anybody in the council have ever acknowledged any challenge remotely close to what Chicago faces. Not one. Ever. They’ve trashed the city’s credit.
Rahm: “Last year, we successfully negotiated landmark pension reform – covering the Laborers and Municipal Workers. These reforms funded about half of our pension obligations. The other half rests with our police and firefighters.”
That reform bill for Chicago is almost certainly invalid, as a trial court already ruled. The city has provided no scoring that the bill would fund “half” of its pension obligations, and it’s not true. As for the police and fire pensions, Chicago might note that annual average payouts increased 362% and 400% since 1985, though inflation only rose 120%.
Rahm: “It is just like a family with a good credit rating, which makes it cheaper and easier to invest in a house or a car.”
Surely Rahm wouldn’t have intended to bring that up, with Chicago’s junk ratings and all.
Rahm: “Every dollar of [the tax] increase is specifically committed to keeping our promise to Chicago’s police and firefighters…. This increase will fund our obligations to the police and fire pension funds….”
Rahm would have leveled with Chicago by saying that earmarking for just the police and fire pensions doesn’t really mean anything. In the long run, it’s all one bucket. We all know that special attention to police and fire is politically wise, but surely that wasn’t Rahm’s motive when he cast the whole budget as a choice between higher taxes or slashing police and fire.
Rahm: “With this budget, we will vote to end scoop-and-toss and excessive borrowing once and for all.”
Billions more in bond issues are already in the pipeline for Chicago, including about $125 million of scoop-and-toss. Pending in the General Assembly already is a bill that would defer contributions to two city pensions — kick the can on funding them — really just another form of very excessive borrowing.
If Rahm had the right speech, I’m confident he would have added these things, which were completely left out of the one he gave:
– The budget assumes Chicago will get an extension from the state — a can kick — to defer city contributions to the police and fire pension. If not, the city’s bill will increase by $500 million in 2015 and 2016.
– Courts are likely to strike down cuts made to Park District pensions. Funding for them is separate but Chicagoans are still on the hook for tax increases if the cuts are invalidated.
– CPS is counting on $500 million from Springfield, which is in great doubt, and its pension is $10 billion short. That, too, is a separate budget, but it all falls on the same heads.
Now, towards the end, maybe the actual speech for Chicago did get mixed in:
Rahm: “We all know that public service is discredited today. Many people hold politicians in contempt and believe that our highest aspiration is simply to get reelected.”
Rahm: “When we look back at our public service, our individual names will be in the history book.”
Count on it, fellas!
A serious budget address for Chicago would have described cuts and reforms as drastic as the calamity requires and called on the General Assembly to authorize them where needed: Layoffs, pay cuts, reconstitution of CPS, an end to collective bargaining, an end to unfunded mandates from Springfield, complete replacement of the current pension system, innumerable operational changes and authorization for bankruptcy as a last resort.
Instead, Rahm and the City Council chose to stay the course: Deny, Delay, Extend, Pretend and the biggest tax hike in Chicago’s modern history.
Here’s a prediction: Rahm has won his last election, for mayor or anything else. He will either throw in the towel after this term or reality will have caught up by the end of this one, exposing this budget and his response to the crisis as shams.
But, for now, stop worrying and click here to crank up that Pflugerville song and video. It’s the best. Taped in a great Austin bar where I used to hang out.
*Mark Glennon is founder of WirePoints. Opinions expressed are his own.