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 The Windy City’s financial condition over the year saw minimal
improvements, but not the kind needed to rescue it from a failing grade issued
by a financial watchdog group.
Truth in Accounting handed Chicago an “F” on its fiscal grading scale for the
second year in a row. The study pegs the city’s overall debt at $32.5 billion,
or $36,000 per taxpayer.
In 2017, Truth in Accounting pegged Chicago’s debt per taxpayer at $45,000. The
report attributes the city’s minor improvement to a recent change in state law
imposing stricter funding requirements for local pension funds.
Informed Chicagoans won’t be surprised that city finances are overwhelmed by
pension debt. Chicago’s unfunded pension liability shrank by $7.8 billion as a
result of the new state law, leaving the Windy City saddled with $28 billion in
pension debt, according to the study.
Despite the size of Chicago’s debts, the full picture is not always visible to
the public. The watchdog also flagged nearly $830 million in retiree health care
debt, $655.3 million of which goes unreported.
Chicago’s massive debt burden earned it the designation of a “sinkhole city.”
The report assigned the “sinkhole city” distinction to any “F”-graded city in
which expenditures surpass revenues.
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Truth in Accounting
publishes annual financial analyses of 75 U.S. cities. This year’s
full report is slated for publication in January, but the group
released its findings for Chicago, New York and Los Angeles in
advance. New York shares with Chicago the status as a “sinkhole
city” – and in fact shoulders a more severe debt burden. Los Angeles
narrowly outperformed Chicago and New York, earning a “D” grade on
the watchdog’s scale.
While Chicago leaders might be tempted to find reassurance in a
financial report showing even modest improvements, they should not
misread these findings as evidence of long-term fiscal stability.
Springfield’s new pension funding requirements do nothing to address
the structural problems fueling Chicago’s growth in pension
obligations.
To the contrary, Truth in Accounting’s latest report serves as a
reminder that serious pension reform is an urgent need. State
lawmakers must give local leaders the ability to rein in the growth
of future pension obligations – a measure that will require amending
the Illinois Constitution. Absent such an amendment, Chicago
taxpayers can expect further tax hikes and city workers can expect
their retirement security to remain in jeopardy.
Staring down a failing letter grade is unpleasant, but not as
unpleasant as staring down insolvency.
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