City Hall Sizes Up Pension Bomb
By Chris Bentley in News on Aug 1, 2012 7:40PM
Photo Credit: Ajit Chouhan
It’s that time of year again, when City Hall releases its preliminary budget document (this time it’s called a financial plan), signaling the official start of budgetary handwringing season. The report outlines Chicago’s key obstacles to closing its $369-million shortfall, which include sagging revenues and looming pension obligations.
The 2013 budget shortfall was projected last year to be about twice that — $741 million. Mayor Rahm Emanuel received unanimous support from City Council for his 2012 budget, which attacked the pending deficit without raiding rainy-day reserves. The Economist magazine praised Emanuel’s inaugural budget for its efficacious belt-tightening, despite its 535 layoffs and some questionable fee increases.
But anticipated pension contributions should put a damper on any celebrations at City Hall. “The city’s total required contributions will grow from an anticipated $476 million in 2012 to $1.2 billion in 2015 and increase steadily to $1.35 billion,” the report states, attributing the burden to state changes of police and firefighter benefits.
For perspective the report points out that by 2015, the amount required in additional pension contributions could otherwise keep 4,400 police officers or 3,800 firefighters on the street. The total is more than twice the annual operating budget for Midway Airport. Ballooning healthcare costs also weigh heavily on the city’s wallet.
The difference won’t likely come from traditional sources of revenue. Utility and telecommunications tax revenues are down while revenue from real estate transaction taxes are up, but still a fraction of what it was before the housing bubble burst.
City Hall’s projected shortfall includes $106 million more in corporate fund spending next year, a 3.4 percent increase, in part to finance citywide recycling.