When Chicago Mayor Lori Lightfoot announced recently that there was a $1.2 billion hole in the city’s budget that needed to be filled, the news was met with near disbelief, and with more than a bit of shock and awe; but close observers of City Hall have seen over previous administrations that Chicago finances have been in abeyance for some time, mostly riddled with mandated pensions that had been often ignored with pension holidays and raids on the funds to provide revenue to public transportation.
What makes his unique is the depletion of sales and tax revenue from COVID 19, and the damage that it has done to economy of America’s third largest city, and while not alone the parameters of Lightfoot’s dilemma is one that has faced a myriad of cities across the country, and with 1.5 million government workers laid off, her plea, and that of Gov. JB Pritzker’s for federal help is warranted.
Congressional help is separately needed to put food on the table and pay the rent and mortgages of millions of American households across the country, but President Trump seems determined not to help Democratic cities and states, for a “bailout” an often used term when the need for help comes from these cities, even if warranted.
While as The Brookings Institution has noted, “sizable reform is needed,” but the recent August Jobs Report showing that 1.4 billion non farm jobs were created has given a push not to give too much help, since the White House sees the report as proof that the economy has come roaring back, despite the view from most economists, including the Federal Reserve Bank, that the U.S. has a fragile economy, and one that has been devastated by the pandemic.
Now with the death of Supreme Court Justice Ruth Bader Ginsburg on Friday, many are wondering if there will be even a measure of political will to negotiate with Nancy Pelosi, and the House of Representatives, even though she reduced what was once a $3.2 trillion bill, to a reduced $2.2 billion aId package; but, with the push to fill the seat as fast as he can, many are wondering if any aid will be forthcoming beyond the $300.00 of extended benefits, once the previously held $600 per week, benefit recently ended, leaving many families, as well as individuals, fearing that they might go underwater, and in some cases homeless.
In the time of growing racial unrest, across the country, laying off, or furloughing state and local employees, is also problematic, since many of these “safe” jobs, many held by Black and Brown women, (often head of household) are now threatening the family budget, already stretched thin since the March pandemic shutdowns.
Equally problematic is the threat to local infrastructures which is also threatening family income, in an area that was once, also thought safe, construction and trades. And, in Illinois, as The Associated Press reported, “first time claims for unemployment benefits totaled 23,339 last week, down from 25,478 a week earlier,” but still not at pre pandemic levels.
For Lightfoot the temptation to raise property taxes is a red hot rail that she does not want to touch, and as one local civic head noted, she can’t tax her way out of a budget deficit. But, earlier this month the mayor said, “"I can't take it off the table, but it is truly the last thing I want to do,"
While some feel that chicago should be more like other cities, for example Boston and its high property taxes as a stable source of income, then again their residents are already “educated” in that fact, but not Chicagoans.
Chicago Magazine opined that “Instead of a property tax increase, Lightfoot called for a new casino in Chicago. That’s not the most sensible solution: as The New York Times reported, “[i]n Detroit, one-fifth of the municipal budget typically comes from casino revenue. And casinos have just reopened, at reduced capacity.Detroit ranks 4th among cities whose budgets are vulnerable to the COVID-19 recession”
Lightfoot is also twining two solutions here; revenue and to regenerate, if granted, to put the casino in areas of the city that have been .underserved, and racially restricted.
Another plan is reaching out to labor leaders to allow volunteer layoffs or furloughs, seems to be naive at best, or fantasy at worst; two traits that do not fit with Lightfoot, but might be reflective of her advisers.
Overall, big cities like Chicago are taking the hit in more than one area, and the effects are near those of the Great Recession with the resultant drop in the nation's GDP has made the maxim that all politics, and money, are local.
To that effect, “A recent New York Times story ranked 41 cities based on how likely they are to suffer severe revenue shortfalls as a result of COVID-19. Using projections from National Tax Journal, Chicago ranked 11th, with an estimated decline of 11 percent. In last place (which is really first place) was Boston, with 4 percent.”
A recent report noted that the number of Americans applying for unemployment benefits fell last week to 860,000, a historically high figure that reflects economic damage from the coronavirus outbreaK,” reported The Associated Press.
That the U.S. Dept. of Labor said that the claims fell by 33,000 from the previous week, with 12.6 million collected standard unemployment benefits, “compared with 1.7 million a year ago,” seems scant consolation.
Lightfoot also, in the vein of Pelosi, added, “plans to seek authority to appropriate $1.3 billion in Coronavirus Aid, Relief and Economic Security Act grant funding to help struggling residents, including the city's homeless, homeowners and those in need of mental health resources. Federal guidance dictates the money must be directed to COVID-related costs, including immediate health expenses and economic and social impacts, reported local station, NBC Chicago.
In an inevitable task list, this is just the beginning of relief for the city, since there is also as the state’s economic driver, Chicago has to also proved mental health services, help manage courts and law enforcement, and in these last few months meet the cries for police defunding, a source of frustration, for those affected by police brutality, but also a necessity and major line item in the city’s operating budget.
Unlike many cities, Chicago did get permission from the state to borrow money, especially to pay its pension debt, but this also proved to be a conundrum as it waged a might battle of the budget under Lightfoot’s predecessor, Rahm Emanuel, that made things worse, before they got better.
In that former enario, “Illinois passed a law allowing Chicago to issue debt under a far more complex structure than regular “general-obligation” bonds.
With the pandemic still in full force, but less so for the city, she has to raise revenue and cut spending, and only time, (which is in short supply) can tell how successful, this can be with little to no Congressional agreement, other than another round of stimulus checks, but with a White House that balks at “bailing out” blue states, things look rough.
By her own admission, Lightfoot says that she inherited indebtedness, both pensions, and the payment of interest from the aforementioned borrowing, yet in 2019, there was a mixed report that Emanuel had stabilized the budget.
But others noted, as we reported at that time, “All in all, the city of Chicago is in a better structural position than prior years,” said Laurence Msall, president of the Civic Federation, which monitors state and local finances, “but it will continue to face revenue and expenditure pressures resulting in projected growth in future deficits.”
We also quoted Budget Director Samantha Fields who remarked, before the mayoral election, that, “The city projects that spending for day-to-day operating costs will increase next year to more than $3.8 billion, an increase of nearly $50 million over budgeted spending for this year. That’s attributable to rising personnel costs and some expansions of city services.”
Of course, that is pre COVID, but what is past has become prologue, and at the time we noted that The Chicago Tribune said that Chicago “could find itself facing higher costs that were not included in the projected budget forecast. Those potentially include tens of millions of dollars for raises and back pay for police, firefighters and some other city workers whose unions are negotiating new contracts — as well as any costs added to the expense of running the Police Department as a result of a proposed federal consent decree aimed at restoring community trust in the long-troubled department.”
Those are now all on the table. And with a pending police contrat, Candidate Lightfoot said at the time complained of “the absence of costs in the report by the mayor; what she called the absence of “specific dollars” and noting that the cost for the monitor (from the consent decree) alone might be as high as $2.5 million, with an overall price tag to implement the reforms would cost at least $10 million a year, insisting that those costs be written into the document itself.
Mark Muro writing for a Brookings blog, “The Avenue” emphasized, “If more specific numbers are desired, a new report from Moody’s Analytics warns that doing nothing to address the economic perils of state layoffs and [local] cutbacks could cost 4 million jobs in the next two years. According to Moody’s, at least $500 billion in combined state and local aid is needed.”
Something to keep in mind as voters head to the polls for the presidential election in less than 60 days.
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