Chicago’s debt grows to $43,700 per taxpayer despite federal COVID-19 aid

Chicago’s debt grows to $43,700 per taxpayer despite federal COVID-19 aid

Fiscal watchdog Truth in Accounting’s July 2021 report showed the Windy City’s pension-fueled debt rose by $2.3 billion from 2019 to 2020 despite receiving substantial federal aid during the pandemic.

Chicago has, again, earned a failing grade on its overall financial health – which worsened during the pandemic despite federal aid, according to Truth in Accounting’s July 2021 analysis.

Each Chicago taxpayer would need to write a check for $43,700 to pay all the city’s bills, the report on fiscal year 2020 found. That liability grew by $2,600 per taxpayer from the previous fiscal year.

The financial watchdog’s report found the city’s funds from grants and contributions more than doubled to $1.17 billion because of federal aid during the 2020 fiscal year, up from $497 million.

But pension and retiree health care obligations swallowed up the gains. Pension debt increased by more than $1.15 billion. Debt for retiree health care more than doubled to nearly $2 billion from $829 million.

Truth In Accounting said the sharp increase in those health care obligations was thanks to a court ruling that required the city to continue certain retiree health care benefits indefinitely. They were previously set to expire in 2022.

This analysis comes after a January 2021 report from Truth In Accounting ranked Chicago second-to-last in financial health out of the 75 most populous cities in the nation. It only beat out New York.

If Chicago wants to stop being labeled one of the nation’s worst “sinkhole cities,” it will need to adopt significant financial reforms, starting with pensions.

The July report showed the city’s crushing load of taxes plus $470 million in CARES Act funding barely touched its liabilities. Overall, Chicago had $9.9 billion in available assets but a total debt burden of over $48.5 billion.

Just to catch up to pension payments, the report stated Chicago would have to lay off all of its city workers, firefighters and police officers – for eight years.

That’s obviously unrealistic, but there is a rational solution available. An amendment to the Illinois Constitution allowing for changes to the cost of future, unearned benefits could fix Chicago’s pension crisis.

The COVID-19 pandemic damaged many of the largest American cities financially. Yet the report highlighted how Chicago’s real issue was its historical struggle with pensions and retiree health care obligations, which “the city has not been properly funding… for years.”

Chicago’s pension crisis has grown so severe it has more pension debt than 44 U.S. states. It is getting worse, as required pension contributions will jump by $1 billion just during Mayor Lori Lightfoot’s first term.

Controlling the rate of future pension costs by linking them to inflation rather than 3% annual compounding raises would help Chicago, as well as other Illinois cities and the state itself. But that change is impossible without an amendment because a 2015 Illinois Supreme Court ruling held the constitution prohibited such changes. That ruling came after state lawmakers tried to make pension changes in 2013.

Former Chicago Mayor Rahm Emanuel endorsed such an amendment upon leaving office. Lightfoot has remained inconsistent on the issue, making public statements decrying Chicago’s pension crisis but not endorsing an amendment to allow reforms.

To pull Chicago out of its sinkhole, Lightfoot should make it clear that pension reform is the solution.

Want more? Get stories like this delivered straight to your inbox.

Thank you, we'll keep you informed!