While 2022 at STUMP was really quiet re: Chicago posts, 2023 picked up again as there was a mayoral race.
But nothing really new under the sun for Chicago problems. While a bunch of money was thrown at Chicago with federal stimulus bill(s) in 2021, and money was doled out over 2021 and 2022, in 2023, doom was looming. The new mayor was not going to be having any fun.
I proposed a novel solution. Really outside the box. WAY outside the box.
This was a podcast episode with the following description:
In this episode, I commiserate with the poor sucker who wins the Chicago mayoral race, and has to deal with the pension disaster coming their way. Also, RIP for Laurence Msall, who had been President of the Civic Federation of Chicago for 21 years and died too young.
The key items to note are that none of them are paying close to 100% ARC (Actuarial Required Contribution — and yes, there are other terms now, but let us not get lost in the weeds) and the funded ratios are all horrible.
I have more detailed information about what is going on with these pensions, but you do need to know that this isn’t typical in most public pensions. Chicago is an outlier.
This past Tuesday, there was an election for the Chicago mayor. Nobody reached the 51% mark, so there will be a runoff between the top two vote-getters. I will come back to that at the end of the post.
While many others are casting Lori Lightfoot’s electoral loss as payback for all sorts of bad behavior on her part [I need not link these], I want to congratulate Lightfoot on her win: no pension failures on her watch.
Mayor-elect Brandon Johnson was out Wednesday thanking voters and talking about his agenda and priorities for the city.
With 99% of precincts reporting, Johnson has 51% of the vote with 286,647 votes, with Vallas having 49% of the vote with 270,775 votes.
Phew, that was close. Just a few thousand votes difference.
I’m willing to bet Vallas will be very happy in about a year when he sees the hideous financial mess he will not have to deal with. To be sure, he’s been through some of this before, but I am not sure he really understands how nasty it is.
I took that opportunity to look back at some of my greatest hits of beating up on Chicago (as I have been doing these past few weeks), a huge portion being the public pension debt.
Then I looked at what Brandon Johnson, the mayor to be, had promised for Chicago:
Vallas and his opponent, Brandon Johnson, do not intend to raise property taxes, but Johnson said his plan does include several other tax hikes to increase revenue.
“I don’t know if there is any other mayoral candidate in history of Chicago that has been willing to put up a balanced budget plan before they are elected,” Johnson said.
In his $800 billion tax plan, Johnson proposes bringing back the city head tax, where large corporations who do most of their work in the city will pay a 1-4 dollar tax for each employee. Johnson also pitches increasing the hotel tax, jet fuel tax, a tax on securities trading and increasing the transfer tax on property sold for more than a million dollars.
“All of that gives us the opportunity to eliminate the structure deficit, make critical investments without raising property taxes,” Johnson said.
Johnson insists a city income tax is not part of his plan, while Vallas said the budget can be balanced from within and Johnson said it can only be done with new revenue.
So, in a time when people are skeptical of doing business in person, Johnson is thinking of making it more expensive to go to Chicago.
….
Johnson has his work cut out for him. While he’s obviously buddy-buddy with the teachers union, that will get him only so far.
They may not be so friendly when he has tried out his tax ideas (and the inefficiency audit) and the extra money for goodies is not forthcoming.
But hey, maybe it will work. We will see.
So that was the mayoral election.
Johnson and his CTU buddies caught the prize, they thought. Let’s see what they’ve actually gotten.
All that said, there are probably at least a couple on that list (oh, budget director, maybe even that Director of Research & Employee Benefits for AFSCME) who may remember why Chicago was forced to ramp up contributions to its pension funds recently.
The very short explanation: if they continued with their old contribution rates, the funds would have run out of assets, and be on a pay-as-they-go basis.
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