Lightfoot and the uphill battle of Chicago finances

Lori Lightfoot, the newly inaugurated mayor of Chicago, has faced some hard knocks in her nearly two month tenure, and among them is facing a crime rate, over the Independence Holiday weekend, that resulted in nearly 33 people shot, four of them fatal.

While the city has had banner headlines on crime for some time, and despite the new mayor’s nocturnal visits to high crime areas, it is not the most pressing problem that she faces - what is most important to help solve this, and other city wide problems, is money, that she desperately needs; and with an inherited budget from former Mayor Rahm Emanuel with a conservative estimated deficit of $700 million. This is indeed the elephant in City Hall.

With a Fall deadline approaching for a new budget, she has to attack the doughnut hole, so to speak, of an over $1 billion pension deficit that was the result of promising too much, and delivering it; but which was not helped by periodic raids, such as in 2007, when Mayor Richard M. Daley took $7 million to prop up the ailing CTA, to avoid a fare hike - the first of many such pension raids, and “holidays”.

To her credit Lightfoot has said that the pension crisis is her top priority, and “one she’s willing to risk her re-election on,” noted an editorial in Crain’s Chicago Business.

“The reason we haven’t solved the pension problem is (lack of) political will, pure and simple,” she said.

“Whether it’s the structural deficit for next year, the pension obligations that we have to meet, the service on the debt, open police, fire and teachers contracts and a range of other issues, we have a significant challenge on our hands. Make no mistake about it,” she added.

“We do need help from Springfield. We’re looking at a variety of options,” she said.

“I’ve had extensive personal conversations with the governor and the legislative leaders on both sides of the aisle. We are actively engaged with them and looking at ways we can get some relief from Springfield and we hope that will happen — whether it’s this session or in the fall veto session.”

In a recent move she has suggested that the state take a much larger role, and consolidate suburban and downstate pension funds in a new system, in exchange for Chicago foregoing  “some revenue the city now gets.”

Gov. J.B. Pritzker has shown some reluctance to this idea, and some observers feel that he has bigger fish to fry, but Lightfoot, who was once a prosecuting attorney, has countered that if this is a definite no, from the governor, then she may be forced to add another huge property tax increase, to address the deficit, with the result that Chicago residents may be reluctant to vote for the graduated tax structure, on the upcoming November 2020 referendum, that Pritzker recently shoehorned through the state assembly.

As The Chicago Tribune noted, at the time of the Emanuel hike, “That won't be the end of the pension-related property tax increases. Total property tax increases of $106 million for the police and fire pension funds are slated for 2018 and 2019.”

Moving on is the concern of the business community, which Lightfoot needs the support to harness most of her agenda, including reform of the public school system, (the nation's third largest), and most importantly, expanding economic development to include areas, long neglected, in employment and housing.

The move to go beyond business growth only in the Loop, is a hallmark of her progressive agenda, and while no one's expecting that this will be accomplished in a year, resetting the “business as usual” plan, to include, this change, has created what some have dubbed her “Marshall Plan”  a “promise to attack racial and financial inequality by focusing more economic development in neighborhoods, “south of Roosevelt and west of Ashland.”

To note, the Englewood neighborhood, one hit hardest by poverty and violence, has an unemployment rate increase to 34 percent in 2017 from 24 percent in 2011, Crain’s reported from the research of Mike Rothschild, “a data scientist in Chicago.”

One area that lies outside of the data, and has faced continued calls for an increase is taxing high-end services, mostly on accounting and legal services, but some see this as insufficient to enrich the city coffers, unless tied to other efforts, and services, to gain more than a million, noted Crain’s editorial board, and supported by columnist, Joe Cahill, who also notes that this is now “a faster-growing segment of the economy than merchandise sales.”

In comparison to other neighboring states, Illinois falls behind, by taxing only “17 services, most of them related to utilities and telecommunications.”

Chicago needs approval from Springfield; but here is a look at what others have on their books: Iowa taxes 100 services, Wisconsin 14, more than Illinois, and Indiana, seem as low tax, gains with an additional eight., says a 2017 report by the Illinois Commission on Government Forecasting & Accountability.”

Cahill sees that Lightfoots’s reluctance to do so, as a failure of leadership, perhaps, say some of her concerns of the long tally of regressive taxes, from her predecessor, might poison even the best of her future intentions, despite his tag of “revenue stagnation.”

Earnest and stalwart, the new mayor faces not only the road less traveled, but the well-worn path of yesterday, in her quest for Chicago’s financial reformation.