Baby, don’t you want to go?
Mayor Rahm Emanuel closed the books on 2012 with $33.4 million in unallocated cash on hand — down from $167 million the year before — while adding to the mountain of debt piled on Chicago taxpayers, year-end audits show.
Last week, Moody’s Investors ordered an unprecedented triple-drop in the city’s bond rating, citing Chicago’s “very large and growing” pension liabilities, “significant” debt service payments, “unrelenting public safety demands” and historic reluctance to raise local taxes that has continued under Emanuel.
It gets worse:
In last week’s report, Moody’s noted that the city’s total fund balance at the close of 2012 was $231.3 million and that Chicago has just $625 million in “leased asset reserves.” Had the city fully funded its $1.5 billion “actuarially required contribution” to its four under-funded city employee pension funds in 2012 alone, “these two reserves would have been entirely depleted,” Moody’s said.
The “unassigned” balance is $33.4 million. Experts recommend a cash cushion of at least $200 million for a budget the size of Chicago’s, according to the Civic Federation. The city ended 2009 with an unallocated checkbook balance of just $2.7 million.
The new round of borrowing brings Chicago’s total long-term debt to nearly $29 billion. That’s $10,780 for every one of the city’s nearly 2.69 million residents. More than a decade ago, the debt load was $9.6 billion or $3,338 per resident.
This is the problem of the blue state model — you make promises you can’t keep and kick the can down the road, hoping that somehow the day of reckoning will stay in the future. It’s clear that the day of reckoning is getting close. As usual, Walter Russell Mead sums up the matter well:
It hasn’t all hit the fan quite yet, but Chicago seems perilously close to real trouble. The city is all out of money, and with an imploding public education system and harrowing levels of violence, it is losing residents fast. Illinois, which itself lost more than 800,000 people to out-migration in the past two decades, is essentially Chicago on a larger scale, with hundreds of billions in unfunded pension liabilities and complete political sclerosis. The state cannot bail out Chicago, and judging by the feds’ reluctance to even lift a finger for Detroit, Chicago shouldn’t expect much more.
Stories like these tend to expose the pointlessness of a lot of American political debate. Defenders of the blue social model will prattle on about its many virtues, and they certainly have some accomplishments to point to. But ultimately the blue model is no longer a matter of choice: cities like Detroit and Chicago and states like Illinois will eventually have to shift away from blue policies whether they like them or not. When the money runs out, one of the luxuries you can no longer afford is self-deception.
And of course we’re doubling down on all these things in Minnesota. Perhaps it will work out better for us, because we’re special.
Cross-posted and comments welcome at Mr. Dilettante’s Neighborhood.