CHICAGO — When he takes office next week, Chicago Mayor-elect Rahm Emanuel will face an estimated $587 million deficit in the 2012 budget — down about 10% from the shortfall going into the 2011, the city’s finance team said Friday.
The city revised its final ending balance for 2010 up to $65 million, the largest in more than a decade, due to higher savings from various initiatives, budget director Eugene Munin announced.
Officials now expect to save nearly an additional $40 million from various measures such as a hiring freeze and reduced health care and non-personnel expenses that originally were expected to generate $45 million in savings.
Chicago’s main revenue sources remain strained by the recession, but some improvements are being seen with projections that were used to craft the 2011 budget remaining on target. Although the city traditionally waits until mid-summer to release preliminary budget estimates, Munin said the gap going into 2012 will likely be about 10% below the $655 million officials faced in crafting a 2011 budget.
“Looking forward into next year, and as a result of the modest increases in economically sensitive taxes and cuts on the expense side of the budget, we are currently projecting the 2012 budget gap to be approximately $587 million,” Munin said. “This is a reflection of the slight uptick in revenues and the aggressive efforts to hold down headcount and expenditures.”
Chief financial officer Gene Saffold asserted that Daley leaves the city in a strong financial position even as challenges persist, including a structural deficit that rises to $1 billion when looming increases in pension payment are considered. The $6.15 billion 2011 budget relied heavily on the use of reserves in order to avoid deep cuts or a tax increase.
“It was a monumental task. And it should not be underestimated how difficult it was to deliver a balanced budget — year after year — while facing a substantial loss in revenue and protecting the taxpayers from higher taxes and fewer services,” Saffold said. “While there are small signs that we are past the worst part of the recession, we know this will be a long process of economic recovery over the next several years,” he said.
Emanuel takes office from a retiring Daley, who did not seek re-election to a seventh term, on May 16.
Last fall, Fitch Ratings downgraded Chicago’s $6.8 billion of general obligation bonds one notch to AA-minus and Standard & Poor’s dropped the credit to A-plus. Moody’s Investors Service in August lowered the GOs to Aa3. All three agencies have stable outlooks.
