June 24, 2014. Chicago. While upper class America is enjoying record investment returns thanks to a never-ending government bailout, the rest of America is still stuck in the recession of 2008. Unemployment came down only because the government stopped counting most unemployed people. And the government has borrowed and spent trillions of dollars with nothing to show for it except cities like Detroit, Chicago and Indianapolis that are either bankrupt or about to be.
Chicago’s finances are just as bad as bankrupt Detroit’s, only on a much larger scale. Images courtesy of Reboot Illinois, and Truth In Accounting.
A recent report from Truth In Accounting and published by Reboot Illinois, including some sobering graphs, compares the finances and deficits of three major industrial belt cities - Detroit, Chicago and Indianapolis. What they show is that while Detroit is the country’s current poster child for mismanaged and bankrupt cities, Chicago is actually in worse shape.
Not so balanced budget
The first observation the researchers make is that all three cities are required by their own laws to function with a balanced budget. But as readers can see from the below charts, it hasn’t been happening. And in Chicago’s case, it hasn’t happened for years. The authors credit that with creative and often dishonest financing by all three cities’ officials. Borrowing money and calling it revenue, as well as overly rosy projections make a billion-dollar loss look like a profit. Sounds like Enron, Worldcom and Bernie Madoff just before their bubbles burst.
‘The charts below show the difference between general revenue and net expenses from 2005 to 2012 (2012 is the latest year for which we have audited financial reports for all three cities),’ the report explains, ‘General revenue includes taxes, while net expenses reflect total expenses less fees and grants. The difference between general revenue and net expenses can be called net revenue. If net revenue is positive, the city has been spending less than it is taking in. If net revenue is negative, the city is spending more than it is taking in.’
As of 2012, the city of Indianapolis had a yearly operating deficit of approximately $110 million.
The city of Detroit entered into bankruptcy last year. So it’s too soon to tell what effect it’s having on the city’s finances. The year before the bankruptcy however, Detroit was running an annual deficit of approximately $360 million. Over the previous four years (2008-2012), the city piled up over $1 billion in debt.
Chicago’s financial chart makes Indianapolis and Detroit look good. Chicago’s population of 2.7 million is 3-times that of Indianapolis’ 844,220, but Chicago’s yearly deficit is 11-times worse. The Windy City’s population is 4-times that of Detroit’s 701,475, and ominously Chicago’s annual deficit is roughly the same ratio as bankrupt Detroit.
Currently, the city of Chicago is looking at a host of ways to balance its budget and fund its worst-in-the-nation pension system. They include a tax on stock and commodity trades, and increases in the city’s property tax and sales tax. State and city lawmakers have put the moves on the backburner until 2015, after the 2014 midterm election and Chicago’s municipal elections next year.
For more information, read the full report at RebootIllinois.com.
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