CHICAGO (Reuters) - Less than a week before taking office, Chicago Mayor-elect Rahm Emanuel on Tuesday released a transition plan that takes aim at a structural budget deficit that it says is on track to top $1 billion in a few years.
The plan calls for a spending freeze and $75 million in structural spending cuts in the $6.12 billion all-funds fiscal 2011 budget Emanuel will inherit from the current mayor, Richard M. Daley.
For fiscal 2012, which begins on January 1, the city will develop a budget using a five-year forecast, according to the plan.
While the plan pegs the budget gap in the next budget at $700 million, the Daley Administration announced on Friday a preliminary deficit of $587 million, which would be about 10 percent lower than the record-high $655 million deficit heading into fiscal 2011.
That deficit was tackled with several measures, including the use of reserve funds created with proceeds from the privatization of city assets.
Emanuel's transition plan said such one-time fixes are not "sustainable or advisable." In fact, the use of nonrecurring revenue was cited by Wall Street rating agencies when they downgraded Chicago's bond ratings last year.
Like many U.S. states and cities, Chicago's revenue shrank during the economic recession, while its expenses continued to grow. City Budget Director Eugene Munin said last week that city revenue is coming in at 2004 levels.
Still, Emanuel's plan calls for phasing out over four years the so-called head tax of $4 per employee paid by businesses.
Other targets in Emanuel's transition plan include overhauling the way money from tax increment financing districts is spent, lobbying practices, government structure and capital planning.
Emanuel, President Barack Obama's former chief of staff, takes office on Monday.
(Reporting by Karen Pierog; Editing by Padraic Cassidy)
