Chicago’s new mayor inherits taxpayers facing biggest public debts of nation’s top 10 cities

Chicago’s new mayor inherits taxpayers facing biggest public debts of nation’s top 10 cities

Each Chicago taxpayer is on the hook for $119,110 worth of unfunded state, city, county and other local government debt. Many of the pensions driving those debts become Lori Lightfoot’s problem on Monday.

Those pondering a welcome gift for Chicago’s new mayor might consider a check for $36,000, which is how much debt the city has per taxpayer. It would certainly ease the challenges ahead for Lori Lightfoot.

But Chicagoans would not be done writing checks if they suddenly had to make good on all the promises made on their behalf by government leaders. Each of the city’s taxpayers is liable for $119,110 when debt is tallied for the city, county, state and other local governments such as schools and the Chicago Transit Authority.

That’s the conclusion of a new report from the nonpartisan Truth in Accounting group.

Of the 10 most-populous U.S. cities, Chicago ranked worst for how much each taxpayer would ultimately pay toward government debt.

The biggest debt creator was the state, at $50,800 per taxpayer, followed by the city at $36,000. Both received grades of F from Truth in Accounting for the assets available to pay bills. Illinois needs about $216 billion to pay its bills. Chicago is $32.5 billion in the red.

Unsurprisingly, pensions were the biggest chunk of the state and city debt burdens. Illinois owes $134.4 billion in unfunded pension liabilities. Chicago owes $28 billion.

The next biggest debt creators were Chicago Public Schools, or CPS, and Cook County. CPS leaves each taxpayer liable for $17,690 worth of debt. Cook County adds $9,890. Again, pensions drive most of their debt.

Lightfoot inherits a bad situation. Several recent tax hikes aimed at the pension problem will make it difficult to ask taxpayers for more.

That’s why her best option is to join outgoing Mayor Rahm Emanuel’s call for an amendment to the Illinois Constitution that protects both retirees and taxpayers. The amendment would preserve already-earned public pension benefits while allowing for changes to future benefit accruals. Chicago’s pension problem is a mirror of the state’s, and both require the amendment so they are not futilely trying to keep up with things such as 3% compounding benefit increases that ignore what’s happening with the larger economy.

The financial position of the city and its pension debt is the most pressing issue facing Lightfoot, who will be sworn in May 20. Emanuel’s welcome gift to her is a ticking time bomb wrapped in a bow.

After Chicago’s pension debt more than tripled between 2014 and 2015, Emanuel pushed through a multi-year tax hike plan and pension payment delays. Chicago pension contributions are set to spike by hundreds of millions of dollars during the next five years, ending in a payment that is $1 billion higher in 2023 than it was last year.

The Emanuel tax hikes included a property tax increase of $543 million, new taxes on ridesharing and e-cigarettes, tax increases on water and sewer services and 911 calls, and hikes in fees ranging from garbage collection to building permits.

Lightfoot will have a tough time squeezing more from taxpayers. Emanuel knew that, too, which is why he backed the constitutional amendment in December.

Growing pension obligations are crowding out vital public services, hamstringing local governments across the state during the budget process and may lead to the state intercepting and diverting funds to pensions. Lightfoot campaigned on a promise to dismantle the Chicago machine, so pension reform is vital if she hopes to have any cash to lift up neighborhoods by attacking crime and improving educational outcomes.

The only way out for Chicago is serious pension reform. Lightfoot could give herself the best welcome gift ever by immediately pushing the pension amendment.

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