Tax increases, spending cuts or layoffs possible to fill city's $520M budget gap

Even after wringing concessions from organized labor and drying up a "rainy day" fund created by privatizing parking meters, Chicago has a $519.7 million budget shortfall in 2010 that can only be filled with tax increases and spending cuts.

"There are no obvious sources of revenue that have not already been tapped," said Civic Federation President Laurence Msall.

"You have to make very severe and structural cuts in the city's operating budget. City government is going to be forced to re-invent itself in the way it delivers services and eliminates services not critical. ... Police and fire have to be part of it."

The shortfall in the city's $6.2 billion preliminary 2010 budget is the highest in recent memory -- even after Mayor Daley ordered 431 layoffs from two recalcitrant unions and cut a two-year deal with organized labor that averted the need for nearly 1,100 other firings.

The gaping budget gap caused by declining revenues would have been bigger without the "rainy day fund" created with proceeds from the 75-year, $1.15 billion lease that privatized Chicago parking meters.

The preliminary budget assumes that $268.7 million of that money will be used to wipe out this year's budget shortfall and that the remaining $51.3 million will be exhausted in 2010.

The outlook for taxpayers is bleak. They'll either face higher taxes, dramatically reduced services or both.

Chief Financial Officer Gene Saffold said nothing is ruled out. But, the mayor has instructed his staff to avoid a property tax increase at all costs.

"We understand people are hurting out there. ... The last thing we want to do ... is to further burden the citizens of Chicago. That's why that is a last resort -- the last thing that we'll turn to," he said.

The sky-high budget gap comes as the city has asked an independent arbitrator to dictate a new contract with Chicago Police officers after more than two years of nowhere bargaining.

Fraternal Order of Police President Mark Donahue accused the city of crying poor-mouth with a purpose.

"Traditionally, initial budget shortfalls are inflated. ... It wouldn't surprise me that these inflated numbers are being established to sway an arbitration decision," Donahue said.

Ald. Tom Allen (38th) added, "People are getting tired of hearing that the sky is falling. There are some signs already that the economy is leveling off."

Saffold countered, "These are real numbers. ... There's no smoke and mirrors here."

If Daley's numbers turn out to be solid, it could jeopardize the city's ability to fill 509 police vacancies and to replace as many as 874 additional officers over the next four years who could be lured into retirement by the city's offer to extend health benefits at age 55 to officers and their dependents.

That's especially true now that Chicago has received only enough federal stimulus funds to hire 50 officers, down from the 400 officers the city had hoped to hire.

Donahue acknowledged that he is concerned about a continued slowdown in police hiring.

But, he said, "They recognize the savings between the salaries of potential retirees and new hires. And they assured us their intent was to fill those vacancies."