In a report that should be surprising to absolutely nobody, the liberal-run cities of New York and Chicago are the two worst cities for fiscal management in the entire country.
The study, done by the Fiscal Times, ranks America’s large cities by their fiscal strength based on their own financial reports. Chicago is right at the bottom.
The Windy City is the poster child for corruption and fiscal mismanagement, with their credit rating seeing several significant downgrades in recent years. Chicago has thin reserves and huge amounts of outstanding debt. Then there’s the city’s underfunded pension plan:
For example, the city’s Municipal Employees’ Annuity and Benefit Fund (MEABF) reported $4.7 billion in assets and $14.7 billion of actuarially accrued liabilities at the end of 2015, representing a funded ratio of just 33 percent. The actuarial calculations rely on a controversial practice of discounting future benefits at a rate of 7.5 percent, which is the assumed return on the fund’s portfolio return. If a more conservative assumption was employed, MEABF’s liabilities would be higher and its funded ratio lower.
New York City is also in bad shape. The Fiscal Times reports their general fund reserves amount to less than one percent of expenditures (the official recommendation is 17 percent). General fund reserves are like a city’s checking account. For every $100 in revenue, a city should have $17 in reserves. New York City has the equivalent of 67 cents.
New York City also carries a very heavy debt burden. According to a report issued by City Comptroller Scott Stringer, New York’s per capita debt greatly exceeds that of all other large U.S. cities, and is even 50 percent higher than that of Chicago. But the comptroller’s report only focuses on bonded debt. Government financial accounting standards require cities to report other long-term obligations such as pensions, compensated absences for municipal employees (accrued sick and vacation leave payable at retirement) and “other post-employment benefits” (or OPEB).
It should be no surprise that these two liberal cities are mired in debt and financial mismanagement. What might be surprising is that liberals still run cities this way.
Also on the list as the “worst of the worst”: liberal St. Louis and Toledo, Ohio. They have massive debt burdens and small general fund balances.
The cities with the best fiscal outlook? Three cities in Southern California that are run by fiscal conservatives: Irvine, Fontana, and Moreno Valley.