The Chicago City Council approved Mayor Rahm Emanuel’s proposed $543 million property tax hike on Chicago homeowners, partially filling a gap between unfunded pension liabilities and available assets that exceeds $32 billion.
The property tax hike is the single largest tax hike in the city’s history.
Sheila Weinberg, founder and chief executive officer of the government watchdog group Truth in Accounting, says the first step in solving the city’s financial problems is being honest with taxpayers about how bad the problem is.
“Tell the public the true debt amount,” Weinberg said. “Truth in Accounting determined that the city’s unfunded pension liability totals [about] $20 billion, but the city does Enron-style accounting by hiding $11 billion off of its balance sheet.”
‘False Impression’ of Budgets
“Each year, Mayor Emanuel has told the public he has balanced the city’s budget, which has given citizens a false impression that the city was living within its means,” Weinberg said. “But the city’s audited financial report gives a better picture of the truth, indicating the city has run a deficit of more than $1 billion each year.”
Weinberg says the financial truth, no matter how bad it is, is better than comforting accounting lies.
“While Chicagoans might not like the idea of higher taxes, we are pleased that they are finally getting an idea of how much the city government really costs,” Weinberg said. “Unfortunately, sometimes the truth hurts, but it is better than the blissful ignorance that has put the city tens of billions of dollars in debt.”
Jonathan Williams, director of the American Legislative Exchange Council’s Task Force on Tax and Fiscal Policy, says Emanuel’s proposed tax hike is a Band-Aid covering more substantial problems needing reform.
“It seems to me like this proposal is clearly a start in paying for the huge unfunded liabilities and the debt it accumulated across the area, but it’s certainly not going to be something that’s going solve the underlying problem,” Williams said. “The underlying problem is the year-to-year debt and the unfunded liability that has been increasing. One property tax increase is not going to do anything to be a substantive cure to this problem.”
Wanted: New Ideas
Williams says Chicago lawmakers need to stop trying tired old ideas and seek newer ideas that have already been proven to work, most importantly in restructuring pensions to consist of how much government pays in, not in offering guaranteed payouts.
“Nobody wants to have that conversation of the fundamental reform going forward, though, and unfortunately, I think this huge property tax increase is going to be very, very painful for the taxpayers to swallow in Illinois,” Williams said. “It’s going to be the first of many dominos yet to fall in this ongoing pension crisis, unless the fundamental shift toward the direct-contribution model is made for new hires.”
Andrea Dillon ([email protected]) writes from Holly Springs, North Carolina.