Predecessors' Mistakes Provide Lessons for Lightfoot
BGA President David Greising writes a regular column for Crain's Chicago Business.
When the Democrat-controlled House passed its HEROES Act in May—a proposed fourth round of federal COVID stimulus—it included $917 billion in funding for state and local governments. It's now August, and the HEALS Act draft COVID relief plan put forward by the Republican-controlled Senate has an entirely different proposed funding level for cities and states: zero new money for them.
With a nearly $1 trillion gap between them, just on this one issue, it's no surprise House and Senate leaders had not reached a compromise. By midweek, an attempt to set a Friday deadline for finishing the deal had disappeared like the wishful dream it once was.
As the saying goes, $1 trillion here, $1 trillion there, and before you know it, we're talking a lot of money. Or, for America's states and cities, you're talking about no money at all. It all depends on whom you're talking to.
Imagine what it must be like inside City Hall, looking at uncertainties on that scale.
At least Mayor Lori Lightfoot in her brief tenure has developed some experience in budget surprises. Rahm Emanuel left her an $838 million gap, far larger than what he acknowledged during the transition.
Lightfoot dealt with that effectively in her 2020 budget. Then COVID hit this year and blew it to pieces.
Federal aid has helped to some extent. In the last round of COVID bailout, Chicago was set to receive around $1.1 billion in federal relief. But Lightfoot astutely saw more gaps were yet to come.
Over the course of this summer, she has advocated for a HEROES Act bailout, knowing all the while a HEALS Act zero-out might hit Chicago instead.
Not since the Great Chicago Fire has a Chicago mayor looked out on a landscape quite so bleak.
Staring into an abyss can cause strange and sometimes scary plans to enter the minds of even responsible public officials. And recent local history provides a few examples of how badly this can go.
Three times, under much lighter fiscal stress, Mayor Richard M. Daley peddled prized city property, privatizing the Chicago Skyway and city parking assets, too. He promised the billions he raised would create a "rainy day" fund to last a generation. Instead, Daley spent it all in the blink of a few annual budgets.
Gov. Rod Blagojevich had his own creative but costly response to the state's fiscal stress. In 2003, he peddled $10 billion in pension bonds, promising to earn more in investment returns than the state would pay in interest on the bonds.
Instead, Blago took more than a quarter of the proceeds to pay pension obligations. The gambit betrayed the premise, and the benefits, of his bond sale.
That wasn't the only recklessness Blago had in store. With the willing support of House Speaker Mike Madigan and a compliant Legislature, he also skipped half of the state's pension payments for two years—patching a budget gap but saddling a generation of residents with the bill.
Lightfoot has said she learned lessons from such mistakes. As one signal, she shut down the city's Infrastructure Trust, set up by Emanuel to facilitate further privatizations. She initially ruled out pension obligation bonds—though that option may now be on the table.
The mayor has tried to avoid property tax hikes and job cuts, too. Yet both may need to be considered.
None of Lightfoot's options are appealing. Such is life leading Chicago while facing COVID-19. The way the talks in Washington are going, some distinctly painful and undesirable options may come into play.
The history of past mismanagement may be painful. But at least it provides useful lessons for the mayor about mistakes she needs to avoid.