Back in May, I published A theory about state and local government finances. Having worked on many budget bills at the state level in the past, I could not understand how there had not already been major downsizing in spending as revenues disappointed at horrific levels thanks to the coronavirus shutdown bullshit. My guess was that cities and states were mostly spending as usual, and they were building insane gaps in the later months, hoping to blackmail the federal government into more local financial aid.
Most state and local governments cannot engage in deficit spending (i.e. where normal operating expenses are funded with debt across fiscal years). The federal government, however, can put as much of its operating expenses on the nation’s credit card that it pleases, as long as Congress keeps jacking up the federal debt limit (which they gladly do every time). When the federal government decides to fund state and local budget shortfalls, that’s the equivalent of taking all the stupid spending priorities Chicago has in any given fiscal year, and putting the cost – with interest – onto our children’s generation. If you think that is morally wrong, well, you get it.
But this happens every single time in financial crises. When Wall Street broke the mortgage market in 2008 and the fallout broke state and local government revenues, a large chunk of their costs was rolled into Treasury debt that our country still owes and is still rolling over. Now the swamp arbitrarily destroyed the strongest economy in American history, and guess what they want to do with the costs ad nauseam? We’ve got people in their 70s and 80s running the government, and they don’t care about the consequences of blowing up the country twice in 12 years. They’ll be dead before the financial reckoning arrives from their bad decision-making. But, hey, their grandkids will write the history books, and I am sure they will have lovely things to say about the 60s generation and the tragedy of the commons.
Nowhere is this swamptastic logic in greater play on an annual basis than Chicago. Both Chicago and Chicago Public Schools are functionally insolvent, and have been for about a decade. But every year, they grovel and connive their way into non-recurring revenues from outside sources, and the charade that Chicago has a government continues. But thanks to the scamdemic, the amount of money that Chicago needs to locate has exploded:
Saying Chicago faces “a crisis unlike anything we have experienced in our lifetimes,” Mayor Lori Lightfoot painted a grave financial picture for the city on Monday, detailing a projected $1.2 billion budget shortfall in the 2021 fiscal year.
On top of that colossal shortfall, the city’s financial picture worsened significantly during the past three months because of an “economic catastrophe caused by the coronavirus pandemic,” Lightfoot said. The city’s budget for the current fiscal year is now $799 million in the red, she said.
Lightfoot has charged the city’s budget team with “reimagining how our government operates post COVID-19,” opening the door to layoffs — an option that the mayor said she will work to avoid.
“The reality is that life will be different for the foreseeable future, impacting how services are provided and how departments are structured, and we must adjust to meet that reality,” Lightfoot said. “Some painful choices will need to be made, including the likely necessity of personnel reductions.”
Negotiations have already begun with the labor unions that represent the city’s more than 37,000 employees, Lightfoot said.
Lightfoot declined to rule out asking the City Council to approve a property tax hike — even as many aldermen still have political scars from the 2015 vote to increase property taxes by $543 million over four years to fund police and fire pensions.
“That is one of the options we have to keep on the table,” Lightfoot said during an interview for WTTW’s “Chicago Tonight.” “That is at the very bottom at the list of options.”
Chicago already has the highest tax burdens in the country, and Lightfoot thinks they should consider hiking taxes even higher. Even before the scamdemic, Chicago was losing population. Massive population loss is one of the first indicators of a downward spiral – see Detroit and Puerto Rico for good examples. Population loss is also going to be a big problem for New York City.
It looks like Chicago was doing exactly what I guessed they were doing – spend now, freak the fuck out later. So is Chicago Public Schools, which is usually in an even more dire financial position than the city, if such a thing can be imagined. A watchdog told CPS that they need to create a shadow budget, no matter how ugly it may be, predicated on the notion that the music has finally stopped and all the chairs are taken.
A more responsible governmental entity would have been making mid-year fiscal adjustments already, but it seems like a lot of municipal players are quite intent on going for broke these days. The Federal Reserve keeps propping up Wall Street and Wall Street keeps lending to bad actors. We know how this gig ends.
On some level, I feel like Democratic leadership in blue states and cities have to understand that they are really, really, really, really awful managers. Like any remotely sane person would look at this mess and say, we’ve screwed the pooch and something big needs to change. But instead, they look for ways to re-distribute the consequences of their behavior and keep at it.