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Sheila Weinberg testifies on Cook Co., Illinois pension debt On December 4, 2012, IFTA CEO Sheila Weinberg testified on the true scope of municipal debt in Cook Co., Illinois before the county board's
Pension Committee. The testimony coincided with the release of the Municipal Government Debt Crisis Report.
Below are the prepared remarks of Institute for Truth in Accounting CEO Sheila Weinberg at the Cook County Pension Committee Hearing, 9:30 am, Tuesday, December 4, 2012.
Commissioner Gainer and members of the Cook County Pension Committee, thank you for inviting me to testify on this critical issue facing Cook County government and its taxpayers. My name is Sheila Weinberg, and I am the Founder and CEO of the Institute for Truth in Accounting. Founded in 2002, the Institute is a nonpartisan organization that works to educate citizens and elected officials about the true financial condition of their governments. It is our mission to compel governments to produce financial reports that are understandable, reliable, transparent and correct.
Today, we are releasing our Municipal Government Debt Crisis Report, which looks at the financial reports of the 518 primary taxing districts in Cook County. What we found is alarming.
Some highlights: the 518 taxing districts in Cook County have accumulated $33.7 billion in debt. Broken down, that number amounts to a $17,000 financial burden per Cook County household, which is what the average household would have to pay their local government to fill its financial hole, above and beyond their “usual” taxes.
Let me emphasize that $17,000 is the average, spread out over the entire county. The financial burden per household for the most troublesome "sinkhole" municipalities include:
· The Village of McCook's per household burden of $316,671 · Bedford Park - $259,320 · Rosemont - $90,468 · Hodgkins - $22,990 · and Melrose Park - $19,352.
The City of Chicago has the sixth highest per household burden at $18,202.
The unfunded pension liability in Cook County alone is $31.07 billion.
These numbers are startling, and much higher than has been reported in the media, higher than believed by elected officials, and likely to be far higher than most residents of Cook County imagine.
While these numbers may be meaningless to many people, there are grave consequences when the debt becomes due: · Property taxes go up, and/or · Mandatory payments to pension funds crowd out spending on necessary public services and programs such as fire, police and sanitation.
Quite simply, the public and elected officials do not work with real numbers when they put together their budgets.
The best example of this is that for decades citizens have been told their village or city’s budget has been balanced as mandated by the Illinois constitution. Therefore I believe citizens assumed have thought that everything is fine. They have thought their government has been living within their means and not going in debt. But our study found that was not the case.
102 of 126 Cook County municipalities and the City of Chicago have incurred debt. This is because sometimes loan proceeds have been included in revenues.
Governments also only included the checks they plan to write in the budget. Therefore even though a government incurs an expense, if they don’t plan to write a check to cover that expense, it doesn’t have to be included in the budget.
In essence governments use checkbook accounting. This worked well when governments only offer current services and benefits. But governments have evolved and they now take on long-term commitments, such as public employee pensions and retirement health care.
Unfortunately the existing antiquated method to calculate budgets has not evolve to account these long-term commitments. Budgeting has not provided elected officials and the public with information about the true compensation costs being incurred, or the long-term financial consequences of pension and government retirees’ healthcare obligations. The result is elected officials and the public can no longer determine whether their budgets are balanced and the extent to which current costs are being passed on to future taxpayers.
All of this has been exasperated by the fact that local governments have not been required to include their retirement obligations on their balance sheets. Our study found that 70 percent of the retirement liabilities were not reported on the balance sheets of Cook County taxing districts. If government doesn't address the pension and truth in accounting issues, there eventually will be a loss of services and/or an increase in taxes.
Taxpayers deserve F.A.C.T. Based Budgeting (Full Accrual Calculations and Techniques), where all costs would be included in the balanced budget calculation and the long consequences of financial decisions would be understood before the budget was passed.
As lawmakers debate pension reform in Springfield, taxpayers and elected officials need to work from the real, true numbers now more than ever. Thank you again for allow me to testify. John and I will be happy to take any questions.
Delivered by Sheila A. Weinberg at the Cook County Pension Committee Hearing, 9:30 am, Tuesday, December 4, 2012 (118 North Clark Street, Room 567, 5th Floor).