Education

$500 Million Chicago Public Schools Budget Shortfall Could Mean More Taxpayer Pain

Yesterday I spotted the following on the Chicago Tribune website concerning the budget gap last year for Chicago Public Schools. Juan Perez, Jr., reported Friday:

Chicago Public Schools faced a shortfall in its operations budget of roughly $500 million at the close of its past fiscal year, leaving the financially troubled district with a significant bill to cover even as it struggles to balance this year’s spending plan.

The budget shortfall was reported in a recently issued financial postmortem for 2016 that also repeated a long-held conclusion: CPS either needs an infusion of new money or will have to make major cuts if it is to keep operating as it has been.

CPS has faced budget gaps for years, but has been able to cover them partly by dipping into cash reserves and tapping costly lines of short-term credit for cash to pay the bills. Those strategies are beginning to reach their limit, district officials acknowledge

(Editor’s note: Bold added for emphasis)

While reading the article I thought, “Where’s the mention of potential new/higher taxes on Chicagoans?” Sure enough, I spotted the following further down the piece:

There’s also expectations from some observers that the city will again turn to its taxpayers for revenue…

(Editor’s note: Bold added for emphasis)

On January 12, the Global Credit Research division over at Moody’s Investors Service suggested:

CPS could consider more difficult options to address its finances should the State of Illinois (Baa2 negative) be unable or unwilling to provide additional relief: levy for debt service on GO alternate revenue bonds, stop making employer pension contributions, or seek state authorization to file for Chapter 9 bankruptcy.

(Editor’s note: Bold added for emphasis)

Stay tuned, Chicago. In the meantime, check out the entire article on the Tribune website here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Monday, February 6th, 2017 Bankruptcy, Education, Government, Taxes No Comments

Reuters: ‘Chicago/Cook County’ Risks Losing $526.4 Million Annually In Federal Funds For ‘Sanctuary City’ Stance

It’s being reported U.S. President Donald Trump is serious about blocking federal funds to “sanctuary cities” like Chicago (first blogged about here).

A recent Reuters analysis of federal data determined “Chicago/Cook County” risks losing $526.4 million in annual funds for shielding illegal aliens.

Rory Carroll, Robin Respaut, and Andy Sullivan noted Thursday on Reuters.com:

The numbers do not include federal money for law enforcement, which was excluded in the executive order, and programs like Medicaid, which are administered by state governments.

Though details remain vague, the order could jeopardize billions of dollars in housing, health, education and other types of federal aid.

Carroll, Respault, and Sullivan reported $2.27 billion in annual funds from the feds for the nation’s 10 largest “sanctuary cities” (Chicago included) are threatened.

To see the breakdown by city/county, check out the Reuters graphic here.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Carroll, Rory, Respaut, Robin, and Sullivan, Andy. “Top 10 U.S. sanctuary cities face roughly $2.27 billion in cuts by Trump policy.” Reuters. 26 Jan. 2017. (http://www.reuters.com/article/us-usa-trump-sanctuarycities-idUSKBN1592V9?platform=hootsuite). 27 Jan. 2017.

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Moody’s On Chicago Public Schools Crisis: Consider Tax Levy, Pension Contribution Stoppage, Or Bankruptcy

“Chicago and New York rank at the bottom of a new analysis of fiscal strength based primarily on data from 2015 financial reports issued by the cities themselves. The analysis includes 116 U.S. cities with populations greater than 200,000.

Chicago’s position at the bottom of the ranking is no surprise to anyone who follows municipal finance. The Windy City has become a poster child for financial mismanagement, having suffered a series of ratings downgrades in recent years. Aside from having thin reserves and large volumes of outstanding debt, Chicago is notorious for its underfunded pension plans…”

The Fiscal Times, January 9, 2107

Moody’s Investors Service recently weighed in on Chicago’s well-publicized financial crisis. Last Thursday its Global Credit Research division published the following on the Moody’s website:

While unfunded pension liabilities will continue weighing on the City of Chicago’s (Ba1 negative) credit profile, plans to significantly increase contributions with higher taxes is a favorable departure from prior funding practices. However, the liquidity crisis at Chicago Public Schools (CPS — B3 negative) is worsening amid a continued budget impasse at the state level, Moody’s Investors Service says in two new research reports released today…

In “City of Chicago: Frequently Asked Questions,” Moody’s says despite the city’s expanding economy, revenue growth, and healthy liquidity, its pension burden is likely to remain among the highest of any rated, major local government for many years.

“While Chicago’s recent tax increases will provide revenue to significantly increase pension funding, the city’s unfunded pension liabilities exceed seven times its revenue and are projected to grow for at least 15 more years,” says Matt Butler, Vice President of Moody’s…

(Editor’s note: Bold added for emphasis)

The well-known credit rating agency added this about the city’s public school system:

In a separate report, “Chicago Public Schools: Frequently Asked Questions,” Moody’s states CPS’ fiscal pressures are intensifying due to depletion of reserves following years of imbalanced operations, unrealistic budget assumptions, and escalating pension costs…

Moody’s says CPS could consider more difficult options to address its finances should the State of Illinois (Baa2 negative) be unable or unwilling to provide additional relief: levy for debt service on GO alternate revenue bonds, stop making employer pension contributions, or seek state authorization to file for Chapter 9 bankruptcy…

(Editor’s note: Bold added for emphasis)

MarketWatch news editor Rachel Koning Beals expanded on Moody’s suggestions for dealing with the CPS situation. She wrote Saturday:

Moody’s has a revised shortlist of painful fixes for the public school system in Chicago.

One idea is to approve another increasingly politically unpopular property-tax levy to pay off debt, as the nation’s third-largest school district just issued another batch of high-interest bonds.

The second idea from the credit-ratings agency is to skip a pension payment to the Chicago Teachers’ Pension Fund, which would come just months after the district and its teacher‘s union hammered out an 11th-hour contract to avoid a second labor strike in a span of four years.

And last resort? Just declare bankruptcy already

(Editor’s note: Bold added for emphasis)

Who’s the say the City will act on any of these suggestions (at least, right away)? That being said, Chicago taxpayers and CPS employees/retirees might want to take heed of all this.

Head on over to the Moody’s Investors Service website here to read the entire release from the Global Credit Research division. It ain’t pretty.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Source:

Koning Beals, Rachel. “Maybe Chicago schools should declare bankruptcy and get it over with, says Moody’s.” MarketWatch. 14 Jan. 2017. (http://www.marketwatch.com/story/maybe-chicago-schools-should-declare-bankruptcy-and-get-it-over-with-says-moodys-2017-01-13). 16 Jan. 2017.

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2017 Tax Hits To Chicagoans

“Broken record” time.

“New/higher fees, fines, and taxes, and less government services.”

Regular readers of Survival And Prosperity (and older ones from my Boom2Bust days) know I’ve been warning about this for years now (since 2008?) concerning Chicago- as well as Cook County, Illinois, and lots of other places aroud the country.

And it’s pretty much what has transpired from what I’ve seen.

Particularly in the “Windy City”- where the hits keep on coming. Hal Dardick reported on the Chicago Tribune website this morning:

Chicago property owners hoping for a respite from rapidly rising taxes will be disappointed in 2017, when city government and Chicago Public Schools will continue digging deeper into their pocketbooks.

Two more major property tax increases are coming. So is a new tax on water and sewer service. And some city dwellers will face other rising costs: a fee for each store-provided disposable bag and slightly higher Park District fees.

Come mid-year, city and suburban residents will be paying a new sweetened beverage tax effective in all of Cook County, and another round of Metra fare hikes is coming soon. Here’s a look at what to expect…

(Editor’s note: Bold added for emphasis)

Dardick did a good job summarizing the dents Chicagoans (and Chicagoland residents) could expect to their finances in the new year. Head on over to the Tribune website here to get the entire story.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

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Taxing Time For Chicagoans

The elections are over. So it’s time for “higher/new fees, fines, and taxes,” as I routinely point out in Survival And Prosperity.

Chicagoans found out yesterday what kind of impact City Hall’s latest “revenue enhancements” will have on their personal finances. Julian Crews, Dan Ponce, and Dana Rebik reported on the WGN-TV Chicago website Wednesday:

The Chicago City Council voted unanimously to pass Mayor Rahm Emanuel’s $8.2 billion 2017 budget Wednesday…

For taxpayers, the hardest pill to swallow in the budget may be a nearly 30 percent increase on water and sewer bills. The hike will be phased in over four years, and is expected to raise nearly $240 million to help shore up the municipal workers pension fund.

But the big impact to taxpayers will come in the form of a tiered increase in property taxes to fund police and fire pensions approved by the Council last year.

Other new fees include:

7-cent fee for all plastic AND paper bags to encourage people to bring reusable bags to the grocery store.
3.5 percent amusement tax for tickets to concerts, sporting events and musicals…

(Editor’s note: Bold added for emphasis)

Crews, Ponce, and Rebik also pointed out coming higher fees with parking rates downtown, around Wrigleyville, and at both Midway and O’Hare airports. More parking meters will be popping up in the Loop and in city neighborhoods as well.

Anyone who’s been paying attention might have observed a disturbing trend lately with Chicago’s fees/fines/hikes. John Byrne and Hal Dardick reported on the Chicago Tribune website this morning:

The average family will pay nearly $1,700 more a year to the city and Chicago Public Schools than they did before the mayor took office in 2011 once all of Emanuel’s tax and fee increases take full effect. There’s been a series of property tax hikes. There was a water and sewer rate increase, plus a new tax on top of that. Not to mention a new garbage hauling fee, 911 phone tax hike, vehicle sticker fee increase and a tax on cable television…

(Editor’s note: Bold added for emphasis)

“$1,700 more a year… than they did before the mayor office in 2011”

Ouch. Byrne and Dardick added:

Even with all of that, taxpayers may be asked for more money in the coming years. Emanuel’s plans for shoring up long-neglected city worker pension funds will require the city to come up with hundreds of millions of dollars more by the early to mid-2020s

(Editor’s note: Bold added for emphasis)

In the meantime, the reporters calculated the “typical” Chicago homeowner ($250,000 residence) can expect to see their tax bill rise another $400 in 2017.

As a former resident of Chicago, I can understand why people would want to live there. That being said, Chicagoans have been required to “pay to play.” And that trend might not be their friend if that Tribune analysis plays out.

For those choosing to remain in the “City By The Lake,” it might be wise for these individuals to take a good, hard look at their finances to figure out if they can keep residing there should the cost of living continue its upwards trajectory.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Crews, Julian, Ponce, Dan, and Rebik, Dana. “City Council unanimously passes $8.2 billion budget, including new taxes and fees.” WGN-TV Chicago. 16 Nov. 2016. (http://wgntv.com/2016/11/16/chicago-city-council-expected-to-pass-mayors-2017-budget-today/). 17 Nov. 2016.

Byrne, John and Dardick, Hal. “The tab on Emanuel’s series of tax hikes: $1,700 a year for the average family.” Chicago Tribune. 17 Nov. 2016. (http://www.chicagotribune.com/news/local/politics/ct-rahm-emanuel-chicago-city-council-budget-vote-met-1117-20161116-story.html). 17 Nov. 2016.

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Chicago Police Department Manpower Shortage Latest

“Chicago readers take note: The ‘thin blue line’ that exists in the Windy City will likely remain that way for the foreseeable future. Carry on accordingly.”

Survival And Prosperity, October 3, 2011

With the help of the popular Chicago police blog Second City Cop, I became aware several years ago of the manpower shortage going on in the Chicago Police Department.

Subsequently, I started blogging about the situation from time to time.

As shootings in the city march past 2,300 for the year, attention is being drawn to Chicago’s “cop shortage” again. Fran Spielman reported on the Chicago Sun-Times website on July 20:

After three shootings this week in a gang-ridden South Side ward that includes Englewood and Back of the Yards, Ald. Ray Lopez (15th) is demanding that Emanuel finally make good on his 2011 campaign promise to hire 1,000 additional police officers.

In the meantime, Lopez wants Chicago Police officers now working in pairs for their own safety to get reinforcements from the Illinois National Guard, the Illinois State Police, the Cook County Sheriff’s office or all of the above

(Editor’s note: Bold added for emphasis)

No DHS or other federal agencies?

On the subject of paying for more police, Alderman Lopez brought up taxes. Spielman added:

When Lopez was asked where he would find the money to hire 1,000 more police officers, he offered to raise property taxes- again.

That’s on top of the $588 million property tax increase approved last fall for police and fire pensions and school construction and the $250 million increase the Board of Education is about to approve for teacher pensions…

Remember what I’ve been saying for years now about new/higher fees, fines, and taxes for Chicagoans?

With news yesterday that the Fraternal Order of Police is urging its members to turn down all requests for “non-mandatory overtime” over the fast-approaching Labor Day weekend, Second City Cop blogged:

It is most certainly is a message to the administration- “Hire more cops!” seems to be what we’re reading. And that’s a perfectly appropriate message to be sending to the city- the Department is badly understaffed

(Editor’s note: Bold added for emphasis)

It will be interesting to see how this all plays out.

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Spielman, Fran. “Shooting of 6-year-old girl revives demand for 1,000 more cops.” Chicago Sun-Times. 20 July 2016. (http://chicago.suntimes.com/news/shooting-of-six-year-old-resurrects-demands-for-1000-more-cops/). 26 July 2016.

SCC. “OT Boycott Gets Media Coverage.” Second City Cop. 26 July 2016. (http://secondcitycop.blogspot.com/2016/07/ot-boycott-gets-media-coverage.html). 26 July 2016.

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City Of Chicago’s Total Unfunded Liabilities Grew To Nearly $24 Billion In 2015

It’s been a while since I last blogged about the Illinois Policy Institute, a Chicago-based non-partisan research organization “generating public policy solutions aimed at promoting personal freedom and prosperity in Illinois.” Yet earlier this week, Ted Dabrowski and John Klingner published a sobering piece on the Institute’s website about Chicago’s mounting financial woes that just needs to be disseminated. From their article:

Chicago property owners concerned about their future property-tax bills have had plenty to worry about over the past year- but a new report on the city’s crumbling finances has all but ensured that property-tax hikes will continue to be a painful reality for local homeowners.

The city already passed a $700 million hike in October 2015 to help plug the hole in police and firefighter pensions, and the city is expected to raise property taxes by another $250 million to fund ailing Chicago Public Schools, or CPS, pensions. And with billions more in other health care and pension shortfalls still unfunded, more hikes are on the way.

But the newest debt numbers in the city’s 2015 Comprehensive Annual Financial Report, or CAFR, show that without massive pension reforms, the city’s tax hikes are just beginning. The report found that the total city debt Chicagoans are on the hook for has more than tripled since 2014.

Chicago’s total unfunded liabilities have jumped by over $17 billion, growing to nearly $24 billion in 2015 from $6.5 billion in 2014. The increase is mostly due to new accounting standards and the fact that in March the Illinois Supreme Court struck down the city’s recent attempt to reform its broken municipal-workers and laborers pension funds.

Add to that their share of sister-government and Cook County pension and health care costs and long-term debt, and Chicagoans are on the hook for over $65 billion

(Editor’s note: Bold added for emphasis)

Disturbing stuff. But that’s reality for you.

You know, last week I read an “interesting” anonymous comment on the popular Chicago police blog Second City Cop. From the July 7 post entitled “And There it is….”:

Millennials as they are called are falling over themselves to move here. Look at Ukrainian village, Buck town south loop West loop, Lincoln Park. The city is becoming gentrified. Major companies are moving their headquarters here. City is on the upswing like it or not.

“City is on the upswing like it or not.”

Never mind its financial cancer that’s bound to metastasize in due time…

By Christopher E. Hill
Survival And Prosperity (www.survivalandprosperity.com)

Sources:

Dabrowski, Ted and Klingner, John. “Chicago’s Total Debt More Than Triples To Over $24B In 2015.” Illinois Policy Institute. 11 July 2016. (https://www.illinoispolicy.org/chicagos-total-debt-more-than-triples-to-over-24b-in-2015/). 14 July 2016.

SCC. “And There it is…” Second City Cop. 7 July 2016. (https://www.illinoispolicy.org/chicagos-total-debt-more-than-triples-to-over-24b-in-2015/). 14 July 2016.

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Christopher E. Hill, Editor

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