Chicago residents began early voting yesterday in the city’s most closely-watched mayoral primary in more than two decades. If a candidate wins more than 50% of the vote on Feb. 22, he or she avoids a run-off election in April.
With a Sun-Times endorsement and a 2-1 lead over his next closest opponent, Rahm Emanuel looks poised to replace Chicago legend Richard M. Daley. If he wins, Mr. Emanuel will inherit a fiscal disaster mired in problems that lack easy – or politically appealing – solutions.
- He will be forced to deal with Chicago’s structural deficit problem. The city’s annual budget – about $6 billion – has fallen short for years, although Daley has used reserves and one-time revenues to close the gap. Those reserves are tapped out, so there is no masking the fact that the city’s costs are rising faster than revenues and inflation, according to a 2010 report from Chicago’s Inspector General. In October, Fitch downgraded the credit rating on Chicago’s $6.8 billion in bonds, noting the city’s weakened financial position.
- The majority of Chicago’s budget – 80% – is spent on personnel costs and bonded debt obligations, according to the IG’s report. Personnel spending rose by 9.2% between 2007 and 2011 (despite an overall reduction in the city’s workforce) due to a deal Daley made in 2007 that promised wage and benefit increases to the major public employee unions. Needless to say, this significantly limits the next mayor’s ability to fix the deficit without slashing public services and employees or hiking up taxes.
- Chicago’s reported deficits do not take into account a severely underfunded pension system, one of the worst among major U.S. cities. Chicago has an unfunded pension liability of $44.8 billion, or $41,966 per household, according to a recent study of municipal pension systems. Chicago has enough assets to cover just eight years of payments. A battle over pension restructuring seems like a foregone conclusion.
It’s going to be a rocky road for whoever takes the reigns at City Hall. Good luck Rahm.
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