The State of State and Local with Chicago Mayor Lori Lightfoot

Chicago Fiscal Status and Immediate Challenges

• Chicago's corporate budget has lost $1.7 billion over two years due to COVID-19, a figure representing 42.5% of its $4 billion corporate budget.
• The city faced a $1.2 billion projected budget deficit for 2021, with 75% of that gap directly attributed to the pandemic.
• To close the deficit without federal aid, Chicago implemented a property tax increase tied to the Consumer Price Index, significant borrowing, and internal operational efficiencies.
• Mayor Lori Lightfoot projects continued fiscal challenges for 2022, noting that revenue losses from the pandemic are ongoing.

Federal Stimulus and Policy Demands

• Mayor Lightfoot criticized the December 2020 stimulus package for excluding direct support for state and local governments, unlike the 2020 CARES Act.
• The Biden administration's proposed $1.9 trillion "American Rescue Plan" includes $350 billion in flexible funding for local governments, though passage remains uncertain in a divided Senate.
• Lightfoot advocates for a systematic, bipartisan group of mayors to consult directly with the federal administration to ensure policies reflect local realities.
• Panelists Emily Brock (GFOA) and Elizabeth Reich (Dallas CFO) emphasized that unrestricted funds are necessary to prevent deepening recessions through layoffs and tax hikes.
• GFOA is actively lobbying to preserve the tax exemption for municipal bonds and support advanced refunding to generate savings for local issuers.

Panel Consensus on Economic Conditions

• Austin Goolsbee (former CEA Chair) noted the current recession differs from 2009 as it was caused by the virus, disproportionately devastating the service sector, travel, and tourism industries.
• Goolsbee observed that while top 25% of income earners saw wealth increases (over $1 trillion for billionaires), state and local fiscal crises are driven by expenditure spikes in healthcare and public welfare, not just revenue loss.
• Elizabeth Reich (Dallas) reported a 24.4% year-over-year drop in sales tax receipts for April 2020 and a 91% drop in hotel occupancy collections.
• Tobias Reed (Oregon State Treasurer) noted that while Oregon had robust reserves from the prior recession, expenses have exploded due to public health needs and social support, coinciding with record-breaking wildfire seasons.
• Oregon's reliance on lottery revenue for economic development creates vulnerability, as lottery funds are tied to bars and restaurants, industries heavily impacted by the virus.

Equity and Long-Term Strategy

• Chicago's "Invest Southwest" program committed $750 million to catalyze private investment in historically underfunded Black and Brown neighborhoods, attracting an additional $300 million in private capital.
• Despite the pandemic, Chicago invested $70 million in these areas in 2020, demonstrating a commitment to equitable growth during fiscal stress.
• A specific investment was secured by Morningstar founder Joe Mansueto to convert a vacant West Side furniture warehouse into a business incubation and artist space.
• Elizabeth Reich highlighted that Dallas had not fully recovered from the 2009 recession prior to the pandemic, having reduced staff by 600 despite a 13% population increase from 2008-2019.

Future Outlook and Predictions (12-24 Months)

• Goolsbee predicts a "bumpy" 12-month period due to political gridlock over aid and potential future drops in commercial real estate values.
• Goolsbee forecasts that urbanization trends will persist long-term, as dense locations remain more productive and higher-paying.
• Reich anticipates short-term declines in commercial property tax values, particularly in hospitality and retail, affecting the FY2022 budget.
• Tobias Reed suggests the crisis may force educational reform, such as eliminating traditional summer breaks and utilizing hybrid "flipped classroom" models.
• Reed and Reich both predict that remote work will alter office dynamics (potentially ending open-office cultures) but will not result in the long-term decline of downtown city populations.
• Emily Brock remains optimistic that continued advocacy and "drumbeat" engagement will secure necessary federal support over the next two years.