Chicagoans owe $43,100 each to settle city debt
A financial watchdog report estimated each taxpayer in Chicago would need to pay $43,100 to settle the city’s debt. It stands at No. 2 for big U.S. cities. Blame city leaders for repeatedly making pension debt worse.
Chicago has the second-highest debt of large U.S. cities, saddling each city resident with $43,100 in unpaid bills, according to a new report from the financial watchdog group Truth in Accounting.
The 2022 Financial State of the Cities study found the Second City owed $38.7 billion in debt, largely stemming from underfunded pensions obligations.
Only New York residents owe more: each taxpayer there is on the hook for $71,400. Washington, D.C., boasted the best financial standing among large cities examined, with a surplus of $4,800 set aside for each resident.
The report found despite federal COVID-19 relief grants and programs propping up city finances, Chicago was considered a “sinkhole city” by Truth in Accounting. Chicago received an “F” grade from the financial watchdogs.
Among the 75 large U.S. cities considered in the study, 61 ranked as “sinkholes” with per capita debt estimated to be over $20,000.
The authors gave Chicago the “F” rating because elected leaders have repeatedly made financial decisions that failed to address the city’s growing debt burden, primarily driven by unfunded pension liabilities. The city had set aside just 23 cents for every $1 of promised pension benefits and no money for promised retiree health care benefits at the onset of the pandemic.
The report used annual data up to June 30, 2020, before the federal government pumped billion into city accounts. It stated growing obligations and Chicago’s poor fiscal health left it unprepared to withstand the COVID-19 pandemic.
The state’s debt is largely from Illinois’ $236 billion public pension debt driven by benefits for Tier 1 employees. They were promised an annual compounding 3% raise protected by the state constitution.
The fix for pension debt in both Chicago and Illinois is amending the Illinois Constitution to allow for changes to the rate of future, unearned pension benefits for government workers. The other fix is writing a check for $100,100.