Chicago will take extra month before laying out 2020 budget woes
Chicago Mayor Lori Lightfoot moved back release of the city’s annual financial projections that kick off the next year’s budget season by one month as her finance team grapples with a swollen budget gap due to rising pension, debt service, and personnel costs.
Former Mayor Rahm Emanuel's administration put the potential operating deficit at between $600 million and $700 million depending on the size of public safety raises and the final number on pension funding increases. Last year’s annual financial analysis warned of a $250 million structural deficit.
Lightfoot took office in May.
Some relief came in the recent release of the public safety pension fund actuarial reports that show the spike next year is as previously expected — $283 million — and not $100 million more as the prior administration warned could be due because of concerns over the impact of poor investment earnings.
The city long has abided by a self-imposed, end-of-July deadline to release preliminary budget figures for the following year. When Emanuel assumed office in 2011 he expanded the financial reportinto an “annual financial analysis” that includes a three-year forecast, a review of expenses and revenues, pension and debt figures, and an update on tax-increment financing and capital spending.
“With our budget process only just begun and given the administration’s shorter transition period before entering office, the city will be taking additional time to analyze year-end totals, program costs and other factors impacting the economy in order to develop a well-informed forecast to guide our fiscal year 2020 budgetary decisions,” budget director Susie Park said in a statement Tuesday.
Lightfoot made the change official with an executive order Tuesday that now requires the city to release the forecast no later than Aug. 31 of each year. The city plans to announce the report on Aug. 28.
While Emanuel was facing what turned out to be a more than $600 million deficit headed into 2012, he didn’t face a run-off in his first election so his finance team had more than an extra month to get a handle on the city’s books by the previous end of July deadline. Lightfoot was among the two top vote-getters in the Feb. 26 election and then won the April 2 runoff and took office May 20.
The administration intends to stick with the AFA format. “Just as in years past, the city’s budget forecast will contain historical data, along with current revenues and projections from every department and program area to determine the status of the city’s overall finances,” Park said.
The end of August release should give market participants plenty of time to digest the report ahead of the city’s annual investors’ conference on Sept. 20. The city’s sister agencies will also present at the conference and the Chicago Board of Education fiscal 2020 budget should be released and possibly approved by the conference date.
No formal plan for tackling the city’s spending gap is expected ahead of the AFA release. The one-month delay also gives the city more time to squeeze out potential savings in a department-by-department review through management efficiencies and operational changes before turning to tax or fee hikes.
Lightfoot has warned there’s “no question” that revenue increases will be needed to close the gap, but she has not outlined a specific plan. Lightfoot has said she is considering raising the real estate transfer tax on property sales and enacting a new tax on professional service transactions like legal work. The city also will see new revenue from legalized marijuana sales that state lawmakers approved and eventually from its first casino, also approved by state lawmakers.
The mayor’s proposed budget is traditionally unveiled at a City Council meeting in October and it's scheduled this year to be announced on Oct. 16. The city’s finance team is led by chief financial officer Jennie Huang Bennett, Park, and comptroller Reshma Soni.
The city’s GO bonds are rated at BBB-minus by Fitch Ratings, A by Kroll Bond Rating Agency, junk-level Ba1 by Moody’s Investors Service, and BBB-plus by S&P Global Ratings. All assign a stable outlook.