Chuy Garcia unveils economic plan for Chicago
When Chicago’s incumbent mayor Rahm Emanuel was forced into a run-off, people started paying a lot more attention to rival candidate Jesus “Chuy” Garcia’s platform. As I commented at the time, I didn’t really know anything about his economic plans for the city. How would fund the city’s severally underfunded pension funds? How would he bring in more revenues to the city that has been increasingly borrowing money to cover its budget? And, perhaps, most importantly, how many things would need to be cut in the process?
On Friday, Garcia’s campaign finally released what it described as "A New Approach in Prudent Fiscal Management of Chicago" - part critique of the way Emanuel administration handled the city finances, part explanation for what a Garcia administration would do differently. You have to wade though a lot of propaganda and campaign-speak to get to the second part, but when you’re a journalist, you get used to that sort of thing. (If you want to read the proposals for yourself, I would just skip to Page 9)
So what does the Garcia campaign propose?
First, it proposes reducing how much money the city agencies spend by consolidating certain functions. There are many municipal agencies that, while controlled by the mayor in every way that matters, are not part of the city government proper on paper - the Chicago Park District, Chicago Public Schools District, the City Colleges of Chicago and the Chicago Housing Authority. The first three in particular levy their own property taxes. Garcia campaign argues that many facets of each agency’s operations could easily be consolidated, saving money and potentially reducing burden on taxpayers.
Based on the history of similar undertakings in the public and private sectors, we expect
to achieve significant service improvements and savings. Overlapping activities within
the four separate citywide governments will get early attention.
These include:
- Commodities and materials purchases
- Software and IT equipment
- Building maintenance
- Administrative management and oversight
- Electricity and gas procurement.
The costs of these functions are substantial within the combined $17.6 billion budgets.
For example, commodities, supplies and materials are expected to cost Chicago
governments more than $500 million dollars over the fiscal year. A five percent
reduction would save city residents $25 million.
The campaign said that there’s precedent for this sort of thing.
This is not pie-in-the-sky speculation about prospective savings. For example, Ohio Shared Services, an initiative undertaken by the state in partnership with Ohio’s largest
employee labor union in 2009, is the first statewide shared services operation for back-office functions. It is expected to achieve $500 million in savings over 20 years.
As recently as March 11, 2015, the Chicago Inspector General said that “savings and
efficiency opportunities remain unrealized” with garbage collection at an estimated total
of nearly $7 million.
The campaign also calls for the City of Chicago and Cook County to work closer together to catch tax scofflaws, eliminate duplicate services and work together on buying supplies and equipment and applying for grants. As the document points out, the city and the county have already been doing things along those lines since Emanuel became mayor, and it has saved both governments millions of dollars. But Garcia campaign argues that a lot more could be done, and plenty more money could be saved.
The campaign calls for changes in the way Tax increment Financing funds are distributed, arguing that Emanuel administration (and Daley administration before it) gave it out too readily. Given that TIF funds come from portions of the property tax revenue that would otherwise go to schools, the parks and the city, this sorts of giveaways are becoming harder and harder to justify.
The Garcia administration will return TIFs to their original mission and actual purpose -
creating economic development, infrastructure improvements, such as building schools
and libraries, and job growth in blighted areas.
Garcia’s administration will keep only those TIFs that meet two criteria: where support is
needed to complete a specific project; and, if the project would not be viable without the
TIF.
The funds from TIFs that are closed will be returned to the tax base of affected
governments, such as the City, the schools and parks, and City Colleges. In addition,
audits of existing TIFs will be expanded to identify and end those that do not meet these
criteria. Future TIFs will be subject to the light of public scrutiny through the creation of
community advisory councils, participatory budgeting of some TIF proceeds, and
greater public disclosure of detailed plans.
Which would help but some money back into schools, if nothing else.
For the looming -and ever-growing - pension debts, the campaign calls for decreasing the costs involved in managing and investing pension funds through combination of consolidation, reducing investment fees and working with the unions to control costs.
These actions will free up resources to help cover the City’s contribution because
any money that the pension systems save can be invested and earn more money.
One of the major sticking point throughout the entire pension crisis is that, per Illinois constitution, pension benefits can’t be reduced or limited - at least not for existing employees. Garcia campaign argues that restructuring benefits for new employees would improve the situation. Personally I question how much it would help, since pension debt comes from unfunded payments for existing retirees, but at least it wouldn’t hurt.
The campaign also believes that it will be able to find more savings by examining the city budgets and the way the city departments are structured. And they are probably right. The city budget is, to put it mildly, enormously complex, and it’s very easy to hide funds, move funds around and strategically reduce/increase them. For example, early in his administration, Emanuel cut funding for the Chicago Public Library system to the point where they had to close most branches on Mondays. After the public outcry, the money to keep the libraries open materialized from somewhere.
The campaign also said that they will look for more ways to raise revenues, though they didn’t want to commit to anything until they got a better look at the city’s budget and how much money it needs to maintain current service levels. The campaign carefully said that increasing property taxes wouldn’t be off the table, but it would be an option of last resort. And it indicated that it would start the process as soon as the election is over.
Finally, the campaign calls for more community participation in the way the city funds - particularly ward-based “aldermanic menu” funds - are spent. Four of Chicago’s 50 wards already have some form of participatory budgeting, and the campaign wants to eventually expand it to all wards.
Overall, the campaign estimates that they would be able to save at least $520 million for the city, parks, schools and city colleges. That’s out of about $17 billion in their combined budgets. Garcia campaign insists that they would probably be able to save more once the financial picture is clearer, and new revenues would help decrease the debt even further. But I can see how people won’t be especially reassured.
Thing is, I’m not convinced Emanuel’s proposal - extending he sales tax to areas that are not currently covered by it - is necessarily better. Especially since, as the pointed out, he proposed something similar earlier in his term, only to drop it due to political backlash.
Personally… On one hand, I’m for anything that would shed light on the black hole that is the City of Chicago budget. On the other hand, saying that you’d bring transparency and accountability is easier said than done.
Emanuel promised more budget transparency, too.
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