Chicago mayor Rahm Emanuel inherited a financial wreck that was decades in the making. But how has he done, in dealing with it?
The mayor has put on a bit of show of turning things around, making government “smaller, smarter, and simpler,” and putting an end to “scoop and toss” financings effectively buying short-term gains with long-term debt, and consequences.
Is it a show, or reality?
More of a show.
The two charts below show financial trends in the last five years of Mayor Richard M. Daley’s tenure. From 2005 to 2009, the total liabilities (debt) incurred by the city rose by about 10%, reaching $24 billion. Over that time frame, the city progressively spent more and more money than it took in, despite advertising its compliance with a state law calling for a “balanced budget.” That’s what led to the higher debt. By 2009, the city’s “change in net assets” (tax revenues, fees, and grants less expenses) had fallen to a negative $1 billion.
To be charitable, that 2005-2009 period ended amidst the worst economic and financial disaster since (at least) the Great Depression. It was a challenging environment, to be sure.
Since then, the overall US economy has recovered. And also since then, Chicago has had a new Mayor. Rahm Emanuel, who has pledged to turn things around financially.
What has happened to Chicago’s finances since 2009? What has happened to its debt and net assets?
The mayor has claimed that he has delivered four balanced budgets in a row. That means debt had to stop increasing, and the change in net assets has been zero or positive, doesn’t it?
The two charts below update the charts above to include Mayor Emanuel’s tenure.
From 2009 to 2014, amidst Mayor Emanuel’s “balanced budgets” and “smaller, smarter, simpler government,” expenses ran $5 billion ahead of incoming revenue, fees and grants. Total expenses rose 20%. And in a period when market interest rates fell dramatically, Chicago’s interest expense rose 50%.