THE CIVIC FEDERATION 2014 ANNUAL REPORT research • information • action since 1894 2014 THE CIVIC FEDERATION’S MISSION To provide research, analysis and recommendations that: • Champion efficient delivery of high-quality government services; • Promote sustainable tax policies and responsible long-term planning; • Improve government transparency and accountability; and • Educate and serve as a resource for policymakers, opinion leaders and the broader public. THE CIVIC FEDERATION’S HISTORY The Civic Federation was founded in 1894 by several of Chicago’s most prominent citizens, including Jane Addams, Bertha Honoré Palmer and Lyman J. Gage. They coalesced around the need to address deep concerns about the city’s economic, political and moral climate at the end of the 19th century. The Federation has since become a leading advocate for efficient delivery of public services and sustainable tax policies. CIVIC FEDERATION STAFF Today the work of the Federation continues to evolve as greater emphasis is placed on working with government officials to improve the efficiency, effectiveness and accountability of the State of Illinois and local governments. The Civic Federation’s Lauracyn Abdullah Institute for Illinois’ Fiscal Sustainability was launched in 2008 to provide Illinois Director of Finance and Operations policymakers, the media and the general public with timely and comprehensive Eleanor Blick analysis of the state budget and other fiscal proposals for the State of Illinois. Communications Specialist, IIFS Roland Calia Project Manager Laurie Cohen PAGE(S) Senior Analyst, IIFS IN THIS REPORT Carol Frenda Letter from the Chairman and President 3 Membership and Events Manager Ashlee Gabrysch Civic Federation Priorities in 2014 Senior Research Associate Sustainable Tax and Fiscal Policies 4 - 5 Jaye Hobart Executive Assistant Responsible Long-Term Financial Planning 6 - 7 8 - 9 Kara Komp High Quality, Efficient Government Services Research Associate Peter Matuszak FY2015 Budget Analysis Summary 10 - 11 Senior Analyst, IIFS Laurence Msall President Institute for Illinois’ Fiscal Sustainability 12 - 13 Seema Murali Project Manager Annual Civic Awards Luncheon 14 - 15 Mark W. Patoska Senior Research Associate Motorola Solutions Foundation Excellence 16 Linda Schulte in Public Service Award Director of Communications Sarah Wetmore Vice President and Research Director Financials 17 Photography by Eleanor Blick unless otherwise indicated Support 18 - 19 2 THE CIVIC FEDERATION from our chairman and president In 2014, the Civic Federation marked 120 years since its founding in 1894 by such civic luminaries as Jane Addams, Lyman J. Gage and Bertha Honoré Palmer. The founders envisioned the Civic Federation as a “citizen agency for promoting efficiency and economy in the organization and management of public business.” Today, the Civic Federation’s role as a citizen agency attention to unsustainable debt management practices continues to guide policymakers, inform the media that have become central to the operating budgets of and empower Illinois taxpayers with the actionable several local governments in Illinois including the City information they need to hold their elected officials of Chicago (read more on page 7). The Federation also accountable. The State of Illinois and many of our local released a first-of-its-kind analysis of Cook County’s governments are facing critical challenges including unincorporated areas, examining the subsidy paid historically low credit ratings, alarming debt levels and by County taxpayers to fund municipal services for pension funding crises. The Federation is committed to unincorporated residents (read more on page 9). All of continuing our work with these governments to identify the research and publications mentioned in this report responsible solutions and a reasonable path forward. are available at www.civicfed.org. In 2014, this work included a five-year plan for the State Our work is only possible with the continued support of Illinois that would fully pay down the State’s $5.4 of our Board of Directors and members. We rely on the billion backlog of unpaid bills while gradually reducing expertise of each member, the leadership of our officers income tax rates, broadening the tax base and building and the dedication of our committee chairs. a reserve fund (read more on page 5). Civic Federation recommendations resulted in progress this year toward Thank you for your continued interest and belief in our much-needed local government consolidation in Illinois work. (read more on page 5). We sought to bring greater Allan R. Ambrose Laurence J. Msall Chairman President THE CIVIC FEDERATION 3 CIVIC FEDERATION PRIORITY Sustainable Tax and Fiscal Policies § The Civic Federation’s non-partisan analyses and recommendations promote sustainable tax and fiscal policies. This work is a critical resource for Illinois governments as they address significant financial challenges such as persistent structural deficits and historically low credit ratings. The Federation’s work this year included a five-year plan to stabilize Illinois’ finances, analysis of Cook County’s complex property tax administration system and progress toward consolidating Illinois’ 6,963 units of local government. “The Civic Federation continues to serve as a tremendous resource for governments in providing insightful plans and commentary on ways to make Chicago a better place to work and live.” —Rahm Emanuel, Mayor of the City of Chicago 4 THE CIVIC FEDERATION A Five-Year Plan to Achieve Long-Term kindergarten and addressed the City’s Fiscal Sustainability in Illinois ongoing efforts to ensure long-term Before Governor Quinn released his solvency for its defined benefit proposal for the State of Illinois’ FY2015 pension plans. budget in March 2014, the Civic Federation’s Institute for Illinois’ Fiscal Sustainability proposed a comprehensive “The per capita tab to cover five-year plan that would fully pay down the local and state unfunded pension State’s $5.4 billion backlog of unpaid bills liabilities has grown to nearly while gradually reducing income tax rates by 20%, broadening the tax base and building $20,000 for a Chicago resident, a reserve fund as protection against future based on 2012 results, according economic downturns. The report provided to an annual report on Chicago valuable context for the General Assembly’s budget negotiations and demonstrated a area pension funds from the Civic reasonable path out of Illinois’ perpetual Federation of Chicago.” fiscal crisis. THE BOND BUYER, 10/2/14 “The Civic Federation’s fiscal blueprint lays out a road map by Progress Toward Local Government Consolidation in Illinois which the state could pay off its According to the U.S. Census Bureau, $5.4 billion stack of unpaid bills Illinois had 6,963 units of local within five years and stave off government in 2012, far more than any other state in the U.S. Illinois “The Civic Federation is drastic budgetary cuts.” made some progress toward eliminating CHICAGO SUN-TIMES unnecessary units in 2014. Following a an invaluable resource. I report by the Illinois Local Government Consolidation Commission, the State appreciate their well reasoned After Detroit: How will Illinois and its enacted legislation allowing local and thoughtful ideas about Communities Respond? governments different options for In 2014 the City of Detroit was annexing, consolidating or dissolving making government more negotiating a plan to emerge from governmental units. The Civic Chapter 9 bankruptcy. On April 23, Federation urges the General Assembly effective and accountable. 2014, the Civic Federation joined with to continue this progress by allowing Their detailed reports help the Federal Reserve Bank of Chicago to voters across the state to dissolve their co-host a sold-out conference examining township governments by referendum. to inform my thinking the impact of these proceedings on Illinois municipalities. In his keynote speech, Annual Reports on Consumer and about the Illinois budget.” City of Detroit Chief Financial Officer Property Taxes John Hill shared his experience helping The Civic Federation’s report on —Elaine Nekritz, Washington D.C. during its financial selected consumer taxes included rates Illinois State Representative crisis in the 1990s and his recent work and descriptions of taxes in place in with Detroit. the City of Chicago on sales, gas, amusement, leases, hotels, tobacco, Update on Chicago Finances from liquor, restaurants, soft drinks, vehicles Mayor Rahm Emanuel and parking. The Federation’s annual Chicago Mayor Rahm Emanuel spoke report on effective property tax rates at a meeting of the Civic Federation’s in metropolitan Chicago found that Board of Directors on July 10, 2014. He residential property tax rates rose across discussed financial progress during his Cook County at a time when the full administration including significantly value of real estate was declining to its reducing the structural deficit, lowest level since 2001. implementing managed competition and phasing out the City’s retiree healthcare subsidy. Mayor Emanuel also highlighted policy initiatives including full-day THE CIVIC FEDERATION 5 CIVIC FEDERATION PRIORITY Responsible Long-Term Financial Planning § The Civic Federation works to focus attention on the long-term consequences of current fiscal policies. We urge all governments to use long-term planning to align financial capacity with essential service objectives. In 2014 governments throughout Illinois were responding