Pensions and debt dominate Chicago’s spending increases, crowding out core services. Without reform, rising obligations will drag the city into deeper financial trouble.
The Chicago Public Schools board is set to vote on the district’s 2025-2026 budget on Aug. 28. It must close a $734 million budget hole, but the district’s finances are a mess.
Chicago Mayor Brandon Johnson wanted a $300 million property tax hike for his big budget. All 50 aldermen said “no.” So then he asked for $150 million and a 35% tax on liquor. Johnson fails to admit it’s not about taxes, it’s about making changes.
Illinois state and local pension debt now tallies $218 billion with both debt to GDP and funding ratios the worst in the nation, according to a new Equable Institute report.
A new financial report predicts residents in the nation’s largest cities will pay more for pensions next year as inflation and recessionary fears “erase” 2021 gains. Chicago topped the big cities for pension debt.
Pension obligation bonds, like payday loans, are a sign of mismanaged finances. Illinois not only leads the nation for using that risky debt, it owes the bulk of it.
Pension debt is a record $144.2 billion while Illinois’ short-term debt is on track to reach $22 billion in three years, exceeding the record $16.7 billion hit during the budget impasse.
S&P Global Ratings said Illinois’ public pension systems are in trouble, and will get worse thanks to the Illinois Exodus and because state leaders refuse to fix the problems.
A Volcker Alliance report on truth and integrity in state budgeting finds Illinois lacking. Debt, budget gimmicks and thin reserve funds gave the state poor marks.
Illinois needed federal aid far more than other states because of pension crisis inaction, as well as an irresponsible pandemic budget. Bailouts won’t protect taxpayers or services for vulnerable Illinoisans, but reforms can.
Chicago’s $1.15 billion projected budget gap is the latest in a decades-long string of structural deficits. Making Chicago’s high taxes worse is not the solution.