A ‘pandemic budget,’ then a ‘recovery budget.’ When will Chicago get a deficit-free budget?
Last year, Mayor Lori Lightfoot unveiled her “pandemic budget,” a spending plan that relied heavily on debt refinancing and a sizable ramp-up of property taxes to close a $1.2 billion deficit. Last week, the mayor laid out her “recovery budget,” a financial road map weighed down by a smaller, but still worrying $733 million deficit.
Someday, perhaps when borrowing today to pay for borrowing yesterday is no longer a go-to tool in City Hall, the city will experience a “deficit-free budget.”
For now, however, the scourge of the coronavirus continues to profoundly influence how Lightfoot crafts her yearly budgets. The pandemic has cuffed the city’s economy with a whole bunch of revenue hurt. Cash flow into City Hall coffers from hotels, restaurants, businesses big and small, has plummeted. Lightfoot can’t just gin up new revenue sources out of whole cloth, so she has to cobble together a budget with a series of one-time fixes and stopgaps.
Those include refinancing roughly $1 billion in outstanding debt, and using the $250 million in savings created by that move to help pay for retroactive pay increases called for in the new contract with Chicago police. And, she will take $782 million from Chicago’s nearly $2 billion allotment of federal American Rescue Plan funding to cover COVID19-related revenue losses. A provision in last year’s budget that ties property tax increases to the consumer price index will generate $20 million in the 2022 spending plan. But Lightfoot says she’s not planning any additional property tax increase.
Laying out her budget forecast last week, Lightfoot embraced what all politicians embrace — the glass-half-full approach.
Yes, the delta variant clouds Chicago’s prospects for a speedy, robust recovery. But new businesses are starting up in the city, and hotel and convention activity is bouncing back. “Businesses are validating why a bet on Chicago is the right bet,” the mayor said.
The success of that wager, and the prospect for many more bets being laid down in the future, will depend not just on how Lightfoot steers the city through these latest financially troubled waters, but how she lays the groundwork for future fiscal prudence. That means weaning the city off of its dangerous dependence on borrowing to survive short-term crises. And it means committing to a push for leaner, more efficient city departments — and stripping out needless bureaucracy.
That won’t be easy, in part because Lightfoot faces a progressive bloc in the City Council bent on devil-may-care spending. The mayor would be smart to say no to calls from progressive aldermen to take every last penny in American Rescue Plan cash and put it toward fulfilling their agenda. There’s no doubt the progressive agenda is a worthy one — its elements range from ramping up access to child care and mental health facilities to rent and water bill relief. Chicagoans are hurting from the pandemic, and they need help.
But fiscal prudence necessitates balancing what can and should be done now with ensuring that the city’s future financial outlook isn’t doomed. Lightfoot’s team proposes spending $40 million in federal relief funds on youth prevention programs, neighborhood recovery initiatives and child care assistance. More relief money may get directed toward social services needs, as the mayor’s team fine-tunes its budget for presentation to the City Council in September.
But one of the pandemic’s most troubling characteristics is its unpredictability. What seemed to be a crisis on the wane is now a crisis making a comeback. Exhausting the city’s American Rescue Plan funds “without any regard for the long-term fiscal consequences would be utterly irresponsible, ineffective, and leave us with nothing to support ourselves,” Lightfoot said, “(if ) another crisis strikes our city.” Imagine if the delta variant ballooned infections to new heights, and City Hall’s coffers couldn’t provide any relief. Not a pretty picture.
The Civic Federation, a government watchdog, looked favorably on Lightfoot’s 2022 budget forecast. At the same time, the federation said in a tweet last week that it wants to know more about the mayor’s plans to address “increasing personnel, debt and pension costs, the latter two of which continue to be the largest clouds looming over Chicago’s finances and cannot be covered directly by the federal stimulus money.”
Lightfoot’s stewardship of Chicago during the pandemic won’t be measured solely on how she handled the wallop COVID-19 unleashed on both the populace and the city’s economy. Just as important, if not more so, will be how her actions now translate into financial stability and economic revival in years, and decades, to come.