Coming to a municipality near you.
Chicago is another trailblazer. But it’s not alone. Other cities are lining up behind it. Bankruptcy may still be the route to go. But until then, homeowners, renters, drivers, users of phones, etc. – in other words regular families who’re just sitting ducks – are going to get squeezed dry, in order to slow the momentum of the public-employee pension crisis eating up the city’s and the school district’s finances.
‘Because of a new accounting rule, Chicago now has to report its pension debt on its balance sheet,’ explains Truth in Accounting. ‘As a result, the city’s reported pension debt grew from $8.6 billion in 2014 to $33.8 billion in 2015.’
The funding hole for pensions amounts to $18.6 billion, according to current estimates, despite six years of booming asset prices. What is this going to look like when asset prices sag?
The City Council approved Mayor Rahm Emanuel’s $8.2 billion budget yesterday. Crisis or no crisis, it’s up 4.8% from last year. There wasn’t anything to debate because the tax and fee hikes had been done outside the budget process.
But this is what Chicago has to deal with. On November 9, S&P Global Ratings cut Chicago Public Schools (CPS) to deep junk (triple-C), citing the district’s ‘continued weak liquidity in its most recent cash flow forecast and reliance on cash flow borrowing, combined with the increased expenditures in the district’s new labor contract that exacerbate the district’s structural imbalance challenges.’
This post was published at Wolf Street by Wolf Richter ‘ November 17, 2016.
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