CHICAGO – Chicago has a $114 million deficit to erase as it heads into the 2018 budget season, Mayor Rahm Emanuel's administration said Monday in the city’s annual financial analysis.
The administration highlighted the gap laid out in the report as the smallest Emanuel’s finance team has faced since he took office in 2011, when the red ink had reached more than $600 million.
“The significant reduction in the annual budget shortfall over the past six years is just one example of the progress we have made together to address our financial challenges," Emanuel said in a statement. "We are more financially secure today than we were six years ago.”
The city also seeks to highlight its pension funding changes that have bolstered contributions and its progress in shedding frowned-upon debt practices such as scoop and toss debt restructuring and using debt to cover short term, or one-time expenses.
The city has come under some criticism in those areas – for failing to act sooner to drop poor debt practices and for failing to go further in its pension overhaul and trimming unfunded liabilities more quickly. After a steep property tax hike and imposing a new water-sewer tax to better fund pensions, the city still needs to identify more revenue in 2023 to fund rising pension payments.
In contrast, the city has generally reaped praise from analysts for better aligning revenues with expenses.
The city has long released a projected deficit figure by the end of July. After Emanuel took office, he began releasing a more comprehensive package in the form of an annual financial analysis that provides an overview of expenses, revenues, a forecast, pensions, debt, tax-increment financing, and liquidity.
A review of the deficits since 2005 shows the gap was at a low of $64.5 million in 2007 and then rose to a high of $655 million in 2011. It remained high at $636 million in 2012 and then dropped to $369 million in 2013 and has since steadily dwindled. The high levels were due to rising costs during the recession and former Mayor Richard M. Daley's reliance on the use of reserves to balance his last two budgets over spending cuts or layoffs.
The administration has changed policies or consolidated various services, utility and energy purchasing, and streamlined service delivery and other contracts, while also holding healthcare costs steady. The city hasn't said how it intends to close the gap.
"The annual financial analysis is the first step in the 2018 budget process. Now that we have identified the structural budget deficit for 2018, we will begin working through options to close the budget shortfall. As we do every year, our focus will first be on identifying savings and reforms," said finance department spokeswoman Molly Poppe.
The city will release its proposed 2018 budget in October. The city is currently operating on an $8.2 billion budget that runs through December.