From the Illinois Policy Blog:
|| Chicago’s dire finances highlight the city’s union problem
About a year ago, the city of Chicago released its 2012 Annual Financial Analysis. Back then I noted that many of the city’s challenges, especially high employee costs and growing pension debt, were aggravated by a heavily unionized workforce. With a new year comes newer, more disturbing financial figures – and the same old union problem is still there.
Mayor Rahm Emanuel’s financial team estimates that personnel costs make up 78 percent of government expenditures. Base wages alone are about two-thirds of all government spending, and health care makes up another 9 percent. With wages and benefits making up such a huge part of the budget, seemingly small changes can have a big effect.
And there certainly have been changes. Aside from police and fire, most city workers saw their pay go up by 16 percent over the same period between 2005 and 2012. All of that has a noticeable effect on the cost of government: Chicago cut its workforce by about a fifth between 2003 and 2012, but total personnel costs went up by 15 percent.
The city still has serious trouble with its pension funds as well. In total, its four main pension funds have only about 36 percent of the assets they should have to cover the benefits they are expected to pay out. The police and fire pensions are in especially bad shape, with funding levels at 31 percent and 25 percent, respectively.
Chicago has just one more year to go before pension costs shoot through the roof.... more