Ferguson's options for Chicago's sagging budget

Ferguson's options for Chicago's sagging budget

How will the City of Chicago close its operating budget deficit, estimated at $635 million for 2012? Joseph Ferguson, the city's inspector general, entered the budget fray this week, releasing a list of 63 different options council members and the mayor could utilize to raise revenue or cut spending.

Ferguson says he's not endorsing any one option, only that his "Budget Options for the City of Chicago" report is "meant to support efforts to balance the budget by arming the public and city officials with context, basic data, and analysis needed to inform the tough choices ahead."

Mayor Rahm Emanuel has promised to close Chicago's budget gap without raising taxes. At a budget town hall held earlier this month in Englewood Emanuel said, "We've been doing smoke and mirrors on the budget," which has been in the red for for years, a reference to the one-time revenue infusions--from the parking meter lease fund, for example--the Daley Administration used to balance its budgets.

"The moment of reckoning is here," he said then.

The first-term mayor has shown a willingness to lay off city employees, leading to fear among public employees about their job security. A laid-off city traffic control aide named Maria Randazzo told the mayor at the Englewood meeting she doesn't have insurance following her job loss and, "I don't have money to pay my bills." Emanuel responded that he had to manage the budget in the best interest of all city taxpayers.

Emanuel will deliver his budget address on October 12, WBEZ reported. Until then, elected officials and city residents will be chewing on some of Inspector General Ferguson's ideas for the city's annual spending and taxing plan. Among them:

  • Eliminate all tax increment financing districts to bring in $100 million
  • Broaden the sales tax to cover more services that are currently not subject to the tax, for $450 million in revenue
  • Place tolls on Lake Shore Drive to raise more than $87 million in revenue
  • Charge city employees who smoke more for health insurance to bring in $4.8 million
  • Eliminate funding for summer and after-school jobs programs to save $6.5 million

The biggest revenue raiser, at $500 million annually, Ferguson included in his report is instituting a city income tax of 1 percent.

Emanuel released a statement late Tuesday about the inspector general's report, reiterating the point that tax increases are off the table:

Across Chicago, residents, Aldermen and now the Inspector General have proposed ideas to tackle the difficult fiscal challenges ahead. Anything that will protect taxpayers and maintain the quality of services the City provides should be considered.

As I have said from the beginning, raising property taxes, income taxes or sales taxes is off the table.  And asking drivers on Lake Shore Drive to pay a toll is also a non-starter.

There are a number of reforms and efficiencies in the Inspector General’s report that are promising, some of which we have already implemented and some we will give serious consideration.

It's worth noting that with regards to the sales tax, Ferguson's report calls for expanding what the tax is applied to--not raising it.

"The sales tax is generally not imposed on services," the inspector general wrote in his report about this option. "In Illinois, only 17 services are taxed, 12 of which are utility services, mostly related to electricity, telephone, and gas services. The other 49 states tax an average of 56 services. Under this option, the sales tax base would be broadened to include more services."

Emanuel supported expanding the sales tax to more services and then lowering the overall tax rate during his mayoral campaign. The Chicago Sun-Times reported on September 28 that Emanuel still wants to push the idea in Springfield, since the General Assembly would have to sign off on any tax restructuring.

© Community Renewal Society 2011

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  • 1) Maybe Ferguson should stick to finding fraud in city government, of which I bet there is still plenty.

    2) After the state blew the 66% income tax increase, one can't trust any government entity to use such to decrease the deficit. Didn't you just have the post on social services providers not getting paid?

    3) There was what I said the other day about making Chicago a doughnut hole.

    But

    4) It appears that the proposed services tax* would disproportionately hit people of color who go to beauty shops a lot. Also, Todd Stroger if, despite his "unemployment," he still goes to the East Bank Club. Maybe that would be a good thing.

    ________
    *Not clear whether Rahm would just ask for authority to impose 1 or 2% in the city, or ask the state to impose the tax, and thus get up to 10% statewide. If the state legislature goes along with the latter, maybe the gerrymandered legislators will get opposition this time.

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