Chicago’s latest Annual Financial Analysis (released yesterday) suggests that city finances are still deteriorating.
The document's base outlook projects what the city calls a “structural budget deficit” (an excess of forecast expenditures over revenue) of nearly $100 million in 2019. These fiscal forecasts have been improving in recent years, as stressed by the Mayor, at least in the sense that the projected deficit has been declining. But in the end, a deficit is still a deficit.
It is worth noting that these annual projections include not only the next budget year, but the following year as well. Last year, the city projected a base outlook deficit of $212.7 million for 2019. While this year’s expectation is for a deficit of about $100 million in 2019, the projections for future years’ deficits continue to climb (i.e., negative numbers getting bigger).
It is also worth stressing, every year, that these budget reports are not actual results, but projections. There are words and there are deeds, and the results of the deeds arrive in the audited annual financial statements. Those statements are based on more reliable accrual-based accounting standards, and have shown expenses running ahead of revenues in recent years, leading to significant declines in Chicago’s net financial position even as the city maintains that it balances its budget as required by state law.
We’ll be taking a deeper dive into Chicago’s latest Annual Financial Analysis soon, but it is worth starting with the very first substantive section in the report: the “Disclaimer and Advice to Readers.” The city began including a disclaimer in the budget document in the Annual Financial Analysis for 2016; previously, the first section of the report was the “Letter from the Mayor.”
A new paragraph in the disclaimer this year reads as follows:
“Readers are cautioned not to place undue reliance on the prospective financial information. Neither the City, the City’s independent auditors, nor any other independent accountants have compiled, examined, or performed any procedures with respect to the prospective financial information contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability, and assume no responsibility for, and disclaim any association with, the prospective financial information.”
In other words, don’t pay too much attention to this.