New report details Chicago's ailing fiscal health

Today, Truth in Accounting (TIA), a nonprofit government finance watchdog, released its analysis of Chicago’s Comprehensive Annual Financial Report (CAFR). According to Illinois state law the CAFR was due within six months after the end of the fiscal year, which ended December 31, 2018. TIA’s research director Bill Bergman went to the Mayor’s Office at City Hall on July 1 and requested a copy of the CAFR. The Mayor’s Office referred him to the Department of Finance, which had no answers. The CAFR was not available on the city’s website until last Friday, July 5 with a letter of transmittal backdated to June 28, 2019.

That is the equivalent of turning in a college paper on Sunday that was due on Wednesday, with Monday’s date scribbled in the top right-hand corner. This is the fourth year in a row the city CAFR has been late. Chicago did receive an “F” in fiscal health for FY 2018 but thinly veiled, illegal tardiness was not a factor.

According to the watchdog's annual report, Chicago has $45.1 billion in bills and only $10.7 billion in available assets to pay those bills after capital and restricted assets are excluded. This results in a $34.4 billion shortfall, or a $38,100 Taxpayer Burden™, which is each taxpayer's share of the municipal debt after the city's available assets have been tapped. TIA's Taxpayer Burden indicator incorporates both assets and liabilities, including pension debt. The Chicago Taxpayer Burden was $2,100 higher than last year.

The Chicago Public Schools and the Chicago Transit Authority are separate entities, so their debt was not included in the report. This makes the city’s $34.4 billion debt all the more concerning (teacher and CTA pensions were included). Two weeks ago Mayor Lori Lightfoot tried to alleviate her city’s financial woes by floating a proposal for the state of Illinois to take over Chicago's public pension system. As TIA’s report shows, the system is mired in unfunded liabilities. Governor J.B. Pritzker shot down the idea, claiming it would diminish the state's credit rating. Although Pritzker neglected to mention that the State of Illinois already has $134.4 billion in unfunded pension liabilities - more than any other state in the country (as of fiscal year 2017), this was likely a consideration that factored into his decision.

Regarding the fiscal health of governments in America, most of the media’s attention is directed at Capitol Hill. The U.S. National Debt is alarmingly high, but it’s also crucial to pay attention to financial conditions at the state and local levels. The people of Puerto Rico and Detroit understand this all too well. Mayor Lightfoot’s predecessors handed her the keys to a city in very poor financial condition, but these problems are not irreparable and she does have the ability to reverse course. The bottom line is that Chicago does not have enough money to pay its bills, which is why it received a failing grade for its fiscal health.

Jason O'Day is an online marketing and social media intern at Truth in Accounting.