Chicago can do better than second-worst sinkhole city, fiscal data analyst says
Chicago, ranked next-to-last "sinkhole city" in a recent government fiscal data analysis group's report about the nation's most populous cities, needs to make some changes to improve its ranking, the group's chair said during a during a recent interview.
"Truth in Accounting (TIA) believes the first step is better budgeting and accounting," TIA's founder and CEO, Sheila Weinberg, said during a Prairie State Wire email interview. "The city should calculate whether its budget is balanced or not by having all costs, including pension and retiree health care benefits earned, included on the balance sheet."
Proceeds from loans and gains the city receives from asset sales, such as parking meters, should not be included on that data sheet, Weinberg said.
"One way this can be done is by using a more accurate method of accounting called full accrual calculations and techniques, or FACT-based accounting," she said.
By 2017, the latest date available for the analysis, Chicago needed $32.5 billion to pay its bills and had an overall tax burden of $36,000 per taxpayer, according to TIA's third annual Financial State of the Cities report issued under embargo earlier this week. Those dismal figures helped Chicago earn a financial grade of "F" in the TIA report.
Most of Chicago's debt is due to unfunded retirement pension promises for its municipal employees, according to the report, which found that Chicago is far from the only U.S. city with that problem. The report found that 63 of the 75 largest cities in the nation do not have enough funds to pay all of their bills, including promised retirement benefits.
"The level of Chicago's indebtedness can be difficult to contextualize, which is why TIA calculates this number as a Taxpayer Burden, or the amount of money each city taxpayer would have to contribute to City Hall for it to be debt free," a press release issued with the report said. "The average Taxpayer Burden across all 75 cities works out to $7,500."
Chicago "staggering" taxpayer burden doesn't include Chicago Public Schools and the city's Transit Authority as they are separate financial entities and their debt wasn't included in the TIA's analysis of cities.
The TIA report named Chicago No. 4, well ahead of No. 5, New York City, on the list of "Bottom 5 Sinkhole Cities" based on taxpayer burden versus taxpayer surplus.
"The only city that ranks worse than Chicago is New York City, but NYC includes school district debt in its annual financial report," she said. "If you include each Chicago taxpayer's share of the city's debt, as well as the overlapping debt from Chicago Public Schools, the Chicago Transit Authority, the Chicago Park District and other local units of government, then Chicago's overall Taxpayer Burden is higher than New York City's. Both cities earned an "F" grade for fiscal health."
None of that is really news to Chicago taxpayers, Weinberg said.
"Chicago taxpayers are already feeling the effects of the city's $32.5 billion debt through rising property taxes and other city fees," she said. "Over time, each taxpayer will be burdened with paying $36,000 in taxes to cover pension costs that should have been included in prior budgets and funded when employees earned the benefits."
Those figures are real and it is important that taxpayers know what's happening, Weinberg said.
"This is not just a numbers game," she said. "Would politicians have been reelected to office if Chicago taxpayers knew that instead of balancing the city’s budget, elected officials were running up debt? Citizens can't be knowledgeable participants or voters if they do not know the true financial condition of the city."
TIA's "Top 5 Sunshine Cities," those that unlike Chicago have enough money to pay their bills, are No. 1, Irvine, California, followed in order by Charlotte, North Carolina; Washington, D.C.; Lincoln, Nebraska; and Fresno California.
TIA's latest report did have some guarded good news for Chicago.
"Chicago's finances seemingly improved, but the city continues to have the second worst financial condition among the 75 most populous U.S. cities," the report said. "A recent law that requires Chicago to increase its contributions to municipal pension plans led actuaries to raise the percentage rate used to determine the current value of promised benefits, which reduced the unfunded pension debt calculation by $7.8 billion."
In state rankings, Illinois's overall tax burden of $50,800 places the state No. 3 behind first-ranked New Jersey, with an overall tax burden of $61,400, and second-ranked Connecticut, where the overall tax burden is $53,400, according to data from TIA's state data lab.
Kentucky ranks fourth worst with an overall tax burden of $39,200, and Massachusetts ranks fifth with an overall tax burden of $33,500.