As Christmas looms around the
corner, it seems as though the only gifts finding their way to the Land of
Lincoln have been a wave of unflattering fiscal report cards.
The latest comes from the watchdog group Truth in Accounting, or TIA, and
details Chicago’s distressed fiscal condition. To illustrate the severity of the
city’s fiscal problems, the organization awarded Chicago an F grade.
“Despite an array of tax increases to help shore up the city’s underfunded
pension plans,” the study declares, mounting pension and benefit debt has
committed the city to a perpetual cycle of worsening fiscal instability.
TIA’s analysis, which was produced using data sourced from the Chicago’s 2016
Comprehensive Annual Financial Report and actuarial reports from the city’s
pension funds decorates Chicago with the status of a “sinkhole city” – a city
whose deficits outpace its available assets – noting that every taxpaying
Chicagoan is on the hook for $41,700 in city debt.
To put this in perspective, median household income in Chicago is roughly
City officials have made irresponsible financial decisions predominately in
relation to public employee pensions and other retirement benefits that have
continued to rise out of proportion with residents’ ability to pay.
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More perverse, the
analysis finds, is the deceptive bookkeeping practices the city
employs to conceal the full extent to which its finances are truly
underwater. While the study remarks that Chicago’s pension debt is
dutifully reported, per the implementation of a recent transparency
law, the level of unfunded retiree health care obligations has been
“These statistics are
jarring, but what’s more alarming,” the analysis notes, “is that
city government officials continue to obscure significant amounts of
retirement debt from their balance sheets, despite new rules to
increase financial transparency.”
The TIA report found $548.3 million in total debt omitted from the
city’s balance sheets. The city needs more than $37 billion just to
pay its bills, according to the analysis.
Taxpayers, who pay the salaries of the officials culpable for such
mismanagement, will continue to suffer from this dysfunction.
Record tax hikes have failed to rescue the city’s finances from this
downward spiral. Yet the city’s recently passed 2018 budget signals
more of the same: a continued dependence on the incomes of overtaxed
residents and a preference for quick-fix gimmicks over substantive
spending reforms. Until the city – along with its sister governments
– can come to terms with its structural debt spiral, failing letter
grades will be the least of its worries.
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