Local Debt Stuns Cook County Treasurer—$108 Billion and Counting

Published December 13, 2011

Households in suburban Cook County, Illinois, owe nearly $33,000 on average for local government debt, with households in the City of Chicago owing more than $63,000 on average, according to Cook County Treasurer Maria Pappas. She has undertaken perhaps the nation’s first comprehensive study to determine all local government debt owed in a major metropolitan county.

“The numbers are staggering,” she said. And she acknowledges her estimates are low because 53 local governments declined to report their debts despite a county ordinance that requires them to do so.

Even so, Pappas was able to total up more than $108.3 billion in debts from 498 Cook County governments, including the county government itself, city, village, and township governments, and school, park, library, fire protection, and other local taxing districts.

Budget & Tax News recently spoke with Treasurer Pappas about the “staggering” debt Cook County governments have piled up and the reasons she believes taxpayers need to know about it.

BTN: What made you decide to try to find out how much local government debt there is in Cook County?

Pappas: From where I sit, as the banker for the county, I kind of hear everything. Property taxes are payable to the treasurer’s office, and I get emails and phone calls from elected officials and residents asking why taxes are going up.

People don’t understand what the expenses are. They need to understand when they vote for a local bond deal what the financial burden will be for their children. Most entities present budgets once a year. Nobody shows up [for budget hearings]. Local leaders say nobody shows up, so they do what they want. Then the tax bills arrive and everyone gets upset.

BTN: What did you find?

Pappas: Everyone’s heard about debt and pension problems at the state and federal levels. That’s gotten lots of news coverage. I was stunned by how big the problems are for local governments. Even little townships and fire districts and park districts have big problems, and their taxpayers are on the hook.

BTN: What finding of the study is most troubling to you?

Pappas: Local governments reported total pension liabilities of more than $50 billion, and the pensions are only half-funded. Unfunded pension liabilities total $25 billion. That’s nearly one quarter of the total countywide debt. Experts say pension plans should be at least 80 percent funded. Only about one quarter of the taxing districts in Cook County are funded at 80 percent.

We also looked at the top 50 residential property tax bills in each municipality from 1996 to 2009 and saw an increase on average of 121 percent. Tax bills are different for different properties, but I think that gives an indication of how property taxes are going up and why people are so upset.

BTN: How long did it take you to compile all this information?

Pappas: We started in 2009 when I proposed a debt disclosure ordinance, which the County Board approved, requiring all local governments to report their yearly budget and their debt.

We review the information and see the debt is overwhelming, but I don’t say much about it. So I go back to the board [in January 2011) to amend the ordinance to get information on pension liabilities and underfunding. That information comes back, we slice and dice, and get a figure of $108 billion. I see something still wrong. So I go back to the County Board for an amended ordinance to also have the local governments report OPEB liabilities—other post-employment benefits. That’s health insurance for retirees. We know roughly one-third did not report that. We also want them to disclose actuarial cost methods.

We want to know rate of return, annual rate of salary increases, participant morbidity rates, and healthcare cost trends. We will slice and dice and do the numbers again. When we add OPEB, those numbers are going to fly up.

In my 20 years of government service, this is probably the smartest thing I’ve done. I’m getting to the bottom of the dirt and grime. When you tell people they owe $30,000 or $40,000 for local government debt, that gets their attention.