At every level of government, the “B-word” is getting a lot of use these days – and it’s usually followed closely by the “C-word.”
Budget crisis. Or rather crises: at the city, state and federal levels, the mandate is to tighten belts without losing momentum on economic recovery. President Obama and Gov. Quinn highlighted the need to cut and invest in their budget addresses last month. And as Mayor-elect Rahm Emanuel prepares to take office in May, the Civic Consulting Alliance is finalizing a city budget transition report that recommends cuts as well as ways to provide better services, department by department. As Commercial Club of Chicago CEO Tyrone Fahner told the Chicago Tribune, our new mayor "has to step back and take a fresh look at everything, because he'll never have a better opportunity than now."
Whether embraced due to opportunity or necessity, the "cut and invest" approach is a tightrope walk. But the alternative (and we can all agree there is no safety net) is far worse. Plus, sometimes a little tension is just what's needed to force the best solutions and ideas to the surface. And we've got fiscal tension in abundance. To wit:
- According to Moody's, Illinois' economy is emerging from its recession, but conditions will improve through 2011 at a slightly slower pace than conditions across the U.S.
- Illinois' economy has lost 437,100 jobs, but 54,700 jobs have been created since employment reached its low point at the end of 2009. Still, the declining unemployment rate carries some bad news: a portion of the uptick stems from job discouragement rather than job growth; the state's active labor force shrank by 2 percent between Q1 2008 and Q4 2009 and has recovered only half that gap since.
- Illinois' home sales have declined by more than one-quarter from one year ago, compared with one-fifth nationally, reflecting both ongoing housing market weakness and the end of the 2009-10 homebuyers' tax credit.
- The median price of a home in the state fell by 6.1% between the third quarter of 2009 and the third quarter of 2010, further demonstrating the weakness of homebuyers' demand.
- The state's unfunded pension liability is $85.5 billion, and the state's pension systems are funded at just 38 percent. The recent income tax increase approved by the Illinois General Assembly included an irresponsible provision to authorize borrowing to cover the gap in unpaid pension obligations. Inconsistently, another provision to authorize borrowing to cover the unpaid vouchers and transfers was rejected by the state legislature.
- Two-thirds of corporations filing Illinois returns owed no taxes in 2008, according to the most recent data available from the Illinois Dept. of Revenue. Economic conditions caused some of that, but the state's antiquated tax rules let others off the hook.
- Chicago’s unemployment rate dropped to 8.6 percent, but recent analysis by the The Chicago Reporter shows why that's a misleading figure. They document that unemployment within the city's black population is at 21.4 percent, the highest rate in the 10 cities the Reporter investigated. The unemployment rate among Latinos is also high, coming in at 13.3 percent. The unemployment rate in the white population, meanwhile, is 7.8 percent.
How do we avoid more missteps and begin to move in a more positive fiscal direction? That question will be the focus of discussion on Thursday, March 17, at a breakfast discussion co-hosted by MPC and the Leadership Fellows Association of Leadership of Greater Chicago, where I'm proud to be both an alum and Board member. The event, The Illinois and Chicago Budget Crisis: What Are the Options?” from 8:00 to 9:30 at the Union League Club (Heritage Room, 2nd floor), will feature a panel discussion moderated by Lois A. Scott, president, Scott Balice Strategies, LLC, and an LGC alum. Ralph Martire, executive director, Center for Tax & Budget Accountability; Gene R. Saffold, chief financial officer, City of Chicago; and David Vaught, budget director, State of Illinois will join Scott to discuss the scope of Illinois' and Chicago's budget crises, as well as potential remedies. Cost is $15 per person.
I hope you’ll join us by reserving your spot online through the Leadership Great Chicago web site at www.lgcchicago.org, or by contacting LaTonya Bradley at 312-565-0300.
Thanks to MPC Project Manager Chrissy Nichols for her research and expertise in drafting this post.