May 7, 2009

Mayor Daley Outlines New Steps to Address City's Budget Deficit

Mayor's Press Office    312.744.3334

Mayor Richard M. Daley proposed today that the City trim non-union personnel costs by $10 million and save $2.6 million through management efficiencies to help address a City budget deficit that has grown to $96 million in the first four months of 2009.

"We expect that our revenue deficit will continue to grow, and that it could total more than $250 million to $300 million by the end of our fiscal year in December," Daley said in a City Hall news conference. "We will continue to take needed steps to manage our way, month by month, through these difficult times."

The Mayor proposed to take the following steps to help reduce the deficit.

  • Save approximately $10 million through a variety of steps affecting the City's 3,600 non-union personnel, including the Mayor himself, members of his staff and department heads and other management and administrative staffs:
  • Make the remaining holidays scheduled for 2009 unpaid
  • Require seven mandatory unpaid furlough days in addition to the three city shutdown days (day after Thanksgiving, Christmas Eve, and New Year's Eve) previously announced
  • Award compensatory time instead of pay for non-union overtime.

The combination of unpaid holidays, furlough days and government shut-down days results in an annual salary cut of about 6% for non-union employees, or a reduction of about 10% for the remainder of the year.

"Every dollar we save from these measures helps to save jobs and maintain services for people," Daley said.

The Mayor also proposed to save another $2.6 million this year with another series of management efficiencies. That includes an additional $2 million in unemployment insurance savings earned by working with the unions to reduce the number of layoffs last year without adversely affecting the corporate fund, and another $600,000 in savings from traffic control reductions and telecom savings.

Even with these steps, the City’s economic situation requires that it further address the basic structural challenge in the budget – personnel costs, Daley said.

“I want to remind everyone that personnel costs comprise more than 80% of our corporate budget, and 90% of our employees are represented by unions,” the Mayor said. “As we've cautioned many times before, we cannot get through these tough times and expect to balance our budget this year and for the next several years without the cooperation and support of all the unions serving the city.”

Months ago, he instructed his staff to sit down with each of the unions representing city employees, including police and fire, to discuss working together to agree on cost savings to help take the burden off Chicago's taxpayers.

“We're working toward an agreement and I'm increasingly confident that we can come together on these issues,” he said.

Daley also addressed how the City will use the $126 million termination payment from the Midway agreement, even though the proposed leasing agreement did not close.

“To ensure the city’s budget would not be impacted by the termination, we propose to allocate $40 million to help balance the budget. This is the same amount that we had planned to allocate if the agreement had gone through,” he said.

In addition, the City will use $33 million for debt service this year and next so it can invest in Chicago's infrastructure, including the menu program for this year.

“We will do this because our menu program goes directly toward the neighborhood street, alley, sidewalk and lighting improvements that make a difference in people's lives. These are costs that are not covered by either of the current state or federal infrastructure programs,” Daley said.

“To protect taxpayers over the next two years, we are proposing to allocate $20 million each year for the 2010 and 2011 budgets,” he said.

The Mayor also addressed the question of why the City is taking these personnel-related steps and not using all the reserve funds from the lease of the Skyway and our parking meters to deal with the budget deficit. He said that approach shows a basic misunderstanding of the city's finances.

He pointed out that the 2009 budget includes the use of $190 million in reserves from the parking meter and Midway transactions. Secondly, it is important to hold a substantial portion of these funds in reserve to protect its strong bond ratings, the highest bond ratings Chicago has had in more than 30 years.

“We haven't ruled out using more of these funds to balance our budgets, but it would be irresponsible to put that approach ahead of better management of government, given the size of the deficits we're facing down the road,” Daley said. "At the end of the day, we must get a better handle on the cost of personnel," he said.

The Mayor pointed out that last year, through spending reductions and improved management, the City was able to present a balanced budget last November and avoid cutting services in a major way, as some cities have been forced to do.