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While his former boss struggles with the national deficit in Washington, Chicago Mayor Rahm Emanuel is dealing with his own fiscal crisis in the nation’s third-largest city.Chicago faces an estimated budget gap of $635.7 million next year, and the deficit could approach $800 million by 2014, Emanuel said today, revealing his initial budget projections for fiscal year 2012.
The shortfall is nearly $50 million bigger than the city estimated when Emanuel took office in May.
A big portion of the deficit comes from union contracts with locked-in raises for the city workers, rising employee healthcare costs, and growing municipal debt. The budget projections don’t include Chicago’s staggering $14.6 billion pension liability.
“We have a structural problem, and the moment of truth has arrived,” Emanuel said at a news conference today, noting that Chicago has faced a budget shortfall since 2001. “An economic recovery will not solve this problem for us.”
Emanuel, who will release his fiscal plan in October, reiterated his pledge not to raise taxes and promised not to solve the problem using one-time fiscal solutions.
The Chicago Tribune reports that Emanuel told city council chairmen this morning that he has asked city department heads to come up with proposals to plug the budget hole. He is also seeking work-rule changes from Chicago’s employees, and has threatened to lay off 625 workers if unions don’t agree to cut costs.
labour leaders have so far opposed the proposed work-rule changes. Instead, unions submitted an alternative cost-cutting proposal earlier this week that they say will save the city $242 million a year.
Their three-part plan includes lowering the number of private contractors the city hires, reducing managerial positions in city agencies, and improving government efficiency.
“I welcome the report and agree there are savings to be found in middle management. That doesn’t take away from every other part of the budget that needs to be scrutinized,” Emanuel told the Tribune, adding that “every specter of the city budget is open for review.”
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