Michael A. Pagano - The Peoples Money: Pensions, Debt, and Government Services

THE URBAN AGENDA

Series Editor, Michael A. Pagano

A list of books in the series appears at the end of this book.

The Peoples Money

Pensions, Debt, and
Government Services

Edited by Michael A. Pagano
University of Illinois at Chicago

PUBLISHED FOR THE
COLLEGE OF URBAN PLANNING
AND PUBLIC AFFAIRS (CUPPA),
UNIVERSITY OF ILLINOIS AT CHICAGO,
BY THE UNIVERSITY OF ILLINOIS PRESS

Urbana, Chicago, and Springfield

The College of Urban Planning and Public Affairs of the University of Illinois at Chicago and the University of Illinois Press gratefully acknowledge the publication of this book was assisted by a grant from the John D. and Catherine T. MacArthur Foundation.

2019 by the Board of Trustees

of the University of Illinois

All rights reserved

Library of Congress Control Number: 2019947746

Contents

Michael A. Pagano

Casey Sebetto

Martin J. Luby, Gary Strong, and David Saustad

Yonghong Wu, Shu Wang, and Michael A. Pagano

David Merriman

Rebecca Hendrick

Jered B. Carr and Michael D. Siciliano

James E. Spiotto

Preface and Acknowledgments

Cities and other local governments across the nation have yet to see their revenue streams return to the preGreat Recession era. Data collected annually on the fiscal condition of US cities estimated that cities general-fund revenues are just 98 percent of what they were in 2006 in constant dollars. Yet taxpayers and fee payers, the people who elect their representatives for the purpose of providing for the peoples health, safety, and welfare, demand an adequate level of government services. Moreover, they demand that borrowed funds used to build the citys infrastructure be paid back to the lender and that the pensions be fully funded to support the workforce when it retires. These demands from the people for good public services have increasingly clashed with the escalating costs of providing infrastructure and pensions, resulting in challenging fiscal times even as the nations general economy has improved.

The paradox of fiscal challenges for cities and other local governments in a time of improving economic conditions was the focus of the 2018 annual UIC Urban Forum, held on the campus of the University of Illinois at Chicago. The theme of the conference was The Peoples Money: Pensions, Debt, and Government Services. The challenge confronting US cities is no more evident than in Illinois, where city fiscal challenges are compounded by the states fiscal crisis. Papers and panels were convened around the manifold challenges of mounting pension and health insurance liabilities, deferred infrastructure maintenance and investment, fiscal architectures not firmly connected to economic growth engines, uncertainty surrounding financial and legal entanglements between the private sector and city government, the changing municipal bond market, and cities creative approaches to meeting their residents needs.

The 2018 UIC Urban Forum was cochaired by Cook County Board president Toni Preckwinkle and UIC Chancellor Michael Amiridis. The event was held on September 13, 2018, and attracted four hundred students, community activists, private citizens, government and nonprofit leaders, and many others. The opening keynote address was presented by Preckwinkle, who reminded the audience of the critical challenges local governments face today, especially as pension costs soar and the costs of services continue to escalate. The closing keynote address was presented by former New York lieutenant governor Richard Ravitch, who reflected on his five decades of public service in support of viable and reasonable financial systems for state and local governments.

Between the two keynote addresses were three lively panels designed to address critical financial challenges facing local governments today and in the future. The first panel, titled Who Gets What and Why? Cities and the Peoples Money, was moderated by the Wall Street Journal s Heather Gillers. She engaged the budget directors of the largest American city, New York, and the third largest, Chicago, Melanie Hartzog and Samantha Fields, respectively, by encouraging a conversation about the similarities and differences between the two cities fiscal policies. The second panel focused on the possibilities of municipal bankruptcy. Richard Greene, of Barrett and Greene, Inc., moderated a panel called When Governments Go Broke: Lessons from Puerto Rico and Detroit. The panelists were Ana Matosantos, Puerto Rican Oversight and Financial Management Committee board member and former California state budget director, and Boysie Jackson, Detroits chief procurement officer. The last panel was a sober discussion of the lasting effects of dealing with fiscal challenges by kicking the can down the road. It was titled The Sins of Our Fathers: Inheriting Pension Burdens. Chris Morrill, the executive director and CEO of the Government Finance Officers Association, and Laurence Msall, president of the Civic Federation, were engaged in a lively discussion, moderated by Katherine Barrett of Barrett and Greene, Inc., about how to prevent future pension crises.

The staff who ensured the conferences smooth operation and who dedicated months of work to assure its success included Jennifer Woodard, Norma Ramos, Brian Flood, and Casey Sebetto at UIC and Karla Bailey of Jasculca Terman Strategic Communications. For seven years, the UIC Urban Forum benefited from the critical events planning skills of Jenny Sweeney. Casey Sebetto, a graduate student in the Department of Urban Planning and Policy, also assumed responsibility for editorial assistance and manuscript supervision.

The 2018 UIC Urban Forums external board of advisors included the following:

Clarence Anthony, executive director, National League of Cities

MarySue Barrett, president, Metropolitan Planning Council

Henry Cisneros, former Secretary, HUD; former mayor, San Antonio; founder and chairman, CityView

Rahm Emanuel, mayor, Chicago

Lee Fisher, dean, Cleveland-Marshall College of Law, Cleveland State University; advisor, CEOs for Cities

Karen Freeman-Wilson, mayor, Gary, Indiana

Bruce Katz, The New Localism

Jeff Malehorn, executive advisor/board member, World Business Chicago

Toni Preckwinkle, president, Cook County Board

Julia Stasch, president, John D. and Catherine T. MacArthur Foundation

Joseph C. Szabo, executive director, Chicago Metropolitan Agency for Planning

Susana Vasquez, associate vice president, Civic Engagement, University of Chicago

The annual UIC Urban Forum offers thought-provoking, engaged, and insightful conferences on critical urban issues in a venue to which all of the worlds citizens are invited.

Note

. Christiana McFarland and Michael A. Pagano, City Fiscal Conditions in 2017 (Washington, DC: National League of Cities, 2017).

Michael A. Pagano
Director of the UIC Urban Forum
Dean, College of Urban Planning and Public Affairs,
University of Illinois at Chicago
July 2019

PART ONE

OVERVIEW

Introduction

CASEY SEBETTO

Shortly after the September 2018 Urban Forum, the federal governments fiscal year (FY) ended and revealed a notable increase in the US deficit. At the federal level, decreasing revenues caused a 17 percent increase in the budget deficit between fiscal years 2017 and 2018, totaling $779 billion. This huge deficit at the federal level places increasing pressures on state, county, and municipal governments to provide infrastructure and public service funding. Across the United States, governments are grappling with decreasing revenues coupled with increasing costs for public services, infrastructure maintenance and development, and pension funding.