Weak Economy Allows Daley to Pass the Buck on Chicago Employee Furlough Plan

Mayor Daley has outdone himself with the way he has sold his Furlough Plan to the public and the media. He has been able to use a faltering economy, along with wise political maneuvers, to pass responsibility for the outcome -whatever it is- on to the Chicago employees unions themselves. But I get ahead of myself. First Lets turn to the Chicago economy.


The economic news coming out of IL and Chicago in particular has been very bleak of late.


* IL's unemployment has reached levels not seen in decades.

Meanwhile, when the statewide unemployment rate reached 9.4% in March — the highest level in 23 years — Gov. Pat Quinn extended unemployment benefits for another 13 weeks, to a total of 72 weeks.

* The unemployment numbers are equally gloomy in Metro Chicago area and have reached levels not seen since 1992

Metropolitan Chicago’s jobless rate was 9.3% in March, a level not seen in 17 years.

The rate jumped from 5.6% the same month last year.

The figure reported Thursday by the Illinois Department of Employment Security has not been adjusted for seasonal factors — such as weather or holidays — that can account for a spike or a decline in hiring. The last time the area had a 9.3% jobless rate was in June 1992.

* Of course, IL poverty levels have risen right along with the rate of unemployment.

As many as 405,000 more Illinoisans—132,000 of them children—are likely to have been pushed into poverty as a result of the recession, according to a new report released today by the Heartland Alliance Mid-America Institute on Poverty. The projected increase, based on expectations that national unemployment will reach 9 percent this year, would represent a 27 percent jump in the number of people living in poverty in the state over the past two years.

Nearly 1.5 million Illinoisans, almost 12 percent of the state’s population, were in poverty in 2007— before the recession began—the most recent year for which poverty data are available. More than 667,000 Illinoisans lived in extreme poverty in that year on an annual income of less than half of the poverty line (below $11,000 for a family of four). An additional 16.2 percent—more than 2 million people–were on shaky financial ground with incomes between the poverty line and twice the poverty line.

* According to the Heartland Alliance report, it is the Chicago-land area is afflicted with much of this poverty.

253,000 more Chicago area residents may have become poor—87,000 of them children. (Since 2007)

160,000 more Chicago area residents may have become extremely poor—54,000 of them children. (Since 2007)

936,259 (11.3%) of the region’s (Chicago) population living in poverty

1,277,860 (15.4%) of the region’s (Chicago) population at risk of falling into poverty

* To further dampen the Chicago's economic diagnosis, the Chicago suburbs have been hit hard by the U.S. housing crisis.

Foreclosure cases filed in the first quarter jumped between 25% and 70% from the fourth quarter in DuPage, Will, McHenry, Lake and Kane counties, according to new data provided to Crain's by the Woodstock Institute, a Chicago-based housing advocacy group. Meanwhile, foreclosures fell 8% in Chicago, the first quarterly decline in a year.

Across the six-county Chicago metropolitan area, foreclosure filings rose 6% in the first quarter to 17,819, the highest one-quarter total since the housing crisis began in mid-2006.

* And while the last quarter did see an 8% decline in foreclosures in Chicago itself, the city's housing market is far from healthy.

Home sales in Chicago plunged 37 percent in the first quarter from a year earlier, and prices fell 26.8 percent, the Illinois Association of Realtors said Friday.

There were 2,909 existing single-family homes and condominiums sold in the first quarter of this year, down from 4,617, and the median price was $216,000, down from $295,000, the group said.

In the Chicago metropolitan area, sales dropped 26.4 percent to 10,306 homes from 14,012, and the median price fell 22.8 percent to $187,500 from $243,000.

"There is no doubt that the burgeoning unemployment rates are dampening recovery in the housing market, but positive numbers in the month-to-month sales suggest that the second quarter may offer the promise of some modest gains in sales and some recovery of median prices," said Geoffrey Hewings, director of the University of Illinois Regional Economics Applications Lab.

Given these economic realities, the Chicago Federation of Labor (CFL) has no chance to pressure Mayor Daley to mitigate Chicago layoffs or budget cuts.


* The current economic environment has only exacerbated Chicago's existing budget problems.

city revenues have already fallen $96 million short of 2009 projections and the year-end gap may hit $300 million.

Furthermore, Mayor Daley -wisely- is not optimistic about Chicago's Short-Term economic prospects.

“When you talk about a glimmer of hope, I don’t know what that meant,” the mayor added. “I don’t know where you see it. Maybe you see it in Washington, D.C., but I don’t think you’re seeing it across the country.”

(Obama's quote, for the record, was about "glimmers of hope" for a recovery.)

Some signs of an economic upswing in recent days are “not as significant as people think,” Daley said, asserting that true recovery may not come until 2012.

* As a result of Chicago's fiscal realities, Daley is pushing for a 14 day furlough plan for city workers that would safe an estimated $10 million. This plan calls upon both nonunion and union workers to accept pay cuts. Mayor daley is threatening 1,600 layoffs (1,100 of which would take place with in the next two weeks)if the CFL refuses to accept the pay cut.

More than 1,100 city employees -- none sworn police officers or firefighters -- will receive layoff notices in the next two weeks unless their unions agree to take 14 days off without pay and comp time instead of cash overtime, alderman were told this week.

During closed-door briefings this week, aldermen were told that city department heads were in the process of identifying employees and that 1,100 layoff notices were imminent.

"They're looking at a certain amount of savings coming from these concessions or layoffs. They need to know in the next week or two to start the ball rolling toward layoffs to accomplish the same savings," O'Connor said.

"I would be surprised if the unions saw it as a [scare] tactic. They know these requirements are in their contracts. It's a necessity if we can't get concessions."

*The CFL has, which agreed to layoff 420 individuals last fall in order to appease the mayor, is demanding that a 2 year no-layoff guarantee in exchange for accepting the concessions.

Organized labor will not take14 days off without pay and comp time instead of cash overtime — following the lead of non-union city workers— unless Mayor Daley agrees to a two-year, no-layoff guarantee, Chicago's most powerful union leader said Thursday.

“Nobody wants to see anybody lose their jobs. But, we can't go through this drill every quarter. We have to put some stability into their lives,” [Chicago Federation of Labor President Dennis] Gannon said.

“It's very difficult to give back something we had to give something away to get. It's not gonna be easy to ask people to make concessions which could be a big percentage of their salaries. But, if there's any agreement, there's gonna have to be some guarantee.”

* Mayor Daley, however, has ruled out any possibility of a no-layoff guarantee and has used the faltering economy as justification.

On Friday, Daley reiterated that he is no position to make a no-layoff promise when nosediving revenues threaten to blow a $300 million hole in his 2009 budget.

"There's predictions of next year being worse. That's the thing you're really concerned about. ... Is [the shortfall] gonna be $350 or $400 million? I wish I could ... predict it, but I cannot. That's the thing we worry about," he said.

"This is a much more serious recession that people don't realize. It's not gonna just flip back. This is gonna be very slow getting out of. ... We're trying to get this set. We're gonna be trying to work it. But, if I said, 'I guarantee you everything'--it's very, very difficult."

* With no agreement reached over the weekend, Daley began preparing for mass layoffs in the next two weeks.

During closed-door briefings this week, aldermen were told that city department heads were in the process of identifying employees and that 1,100 layoff notices were imminent.

"They're looking at a certain amount of savings coming from these concessions or layoffs. They need to know in the next week or two to start the ball rolling toward layoffs to accomplish the same savings," O'Connor said.

I am a union man at heart, but I must tip my cap to mayor Daley and give credit where credit is due. He has handled this situation beautifully. I know that the Mayor is used to getting what he wants without much political opposition or blow back. In this instance, however, I believe that the Mayor painted a political masterpiece as he has produced the perception that this is not really his decision to make.


I am not commenting on the merit of either side's position, but the fact of the matter is that Daley has been able to spin away his responsibly and accountability on this issue.


* First, Daley used the economic situation to claim that his hand has been forced by the economic environment.

Daley said he is not in a position to make that no-layoff promise — not when city revenues have already fallen $96 million short of 2009 projections and the year-end gap may hit $300 million.

“I don't want to do it [layoffs]. But if next year, everything falls apart and the economy gets worse, what do we do?…That's the problem,” Daley said.

“I'm not trying to be a doomsday person. I'm just telling you the facts….Someone said, ‘There's a glimmer of hope’ [for the economy]. Where is it? We don't see it.”

Chief Financial Officer Gene Saffold said there would be a “significant hole” even with union concessions.

Now, I do not dispute that the economic situation forces Daley to take action. But the notion that his furlough plan is the only option that can solve the City's budget problem is simply wrong. There are a variety of other budget reduction solutions that have been floated.

Some aldermen demanded a sliding scale of unpaid days that exempts those earning less than $35,000 a year. The higher the salary, the greater the sacrifice.

Others want to declare an “emergency” that would allow the city to void all of its contracts — with unions as well as private vendors — instead of hoping that organized labor volunteers to share the pain.

Still more aldermen questioned the $250 million-to-$300 million year-end shortfall that triggered the need for more employee givebacks. It comes from the same mayoral aides who insisted that revenue estimates that have fallen woefully short were “conservative.”

Mayor Daley is certainly limited due Chicago's fiscal situation, but the mechanisms used to cut the deficit and the details of the Furlough Plan are not chosen at random. They are Daley's preference. Lets not forget, he IS the mayor of CHICAGO after all.


Ironically, Daley has manged to pass the buck for the outcome on to the unions.

* Second, Daley put the pressure on the unions by cutting the salaries of 3,600 non-union employees, himself included.

It would require the mayor, 50 aldermen and other non-union employees to: take seven unpaid furlough days in addition to three government shutdown days; get no pay for seven remaining 2009 holidays and get comp time instead of cash for overtime. Roughly 400 of the 3,600 non-union employees are eligible for overtime.

“We wouldn't ask the unions to do anything that management and other non-union employees wouldn't be prepared to do or haven't already done,” the mayor said.

In my humble opinion, this move has made it impossible for the unions to exert any pressure the mayor in the hopes of even the smallest concession. Given the fact that most people are hurting in some form due to this recession, the public simply does not have sympathy for union members who refuse to take the same pay cuts that have been placed upon non-union employees.

This opinion does not appear to be mine alone. The Daley administration was well aware of the pressure the non-union cutbacks would create.

On Monday, Corporation Counsel Mara Georges confirmed that layoff notices were imminent.

“We are currently accumulating layoff lists. . . . The thought is to do it as soon as possible and, if we cannot get anywhere with the unions, to be in a position to issue those notices on June 1,” Georges said.

Noting that the non-union givebacks put “tremendous pressure” on organized labor, Georges said, “When the union is confronted with either matching what the non-union workforce has done or suffering layoffs, it is up to them to decide which course they want to take.”

Tomorrow the city council will pass Daley's Furlough proposal. And in the next two weeks the media will watch to see if the union accepts the Mayor's cuts or not.

What I find impressive is that this this issue is framed as though it is the unions that are responsible for the outcome. True, the unions will choose to accept the cuts or experience layoffs. But those are the only two options that they have been presented with.

Mayor Daley has outdone himself.

I have no opinion on the merits of the plan, and do not care if it passes, but I certainly know who is accountable for its outcome.

Do you?