"Fiscal watchdog Truth in Accounting reports every Chicagoan is on the hook for $135,700 when combining city and state debt
A new report on the combined state and local debt burden for taxpayers in the 10 largest cities shows Chicago in last place. The cost of union benefits is driving that burden, with 69% of the city’s nearly $98 billion debt total owed to pensions and another 6.7% owed to other post-employment benefits like retiree health insurance. That means over 75% of Chicago’s total local debts are due to the cost of union benefits alone.
The Windy City’s total state and local debt burden is a staggering $135,700 per taxpayer – over $44,000 higher than New York City, which landed in nineth place. Chicagoans’ debt per taxpayer burden is over 12 times that of residents in first place Phoenix, Arizona, further highlighting the massive gap that separates Chicago from other large cities regarding debt.
Chicago’s debt burden is a staggering $43,100 per taxpayer, but taxpayers may be unaware of the other public debts they are on the hook for in addition to the city’s debt. The report issued by fiscal watchdog, Truth in Accounting, breaks down other local government entities’ debts and how their condition adds to the taxpayer debt burden for Chicagoans. For example, Chicago Public Schools adds another $21,000 per taxpayer to the debt burden for city residents. Cook County debts further add another $9,400. Combining the city’s debt with other local government debts brings the per taxpayer burden to $78,700. In addition to the total local level debt burden, each Chicagoan also owns their portion of the state’s massive debt burden as well, adding another $57,000 into the mix for a grand total of $135,700.
Chicagoans on the hook for $78,700 in local government debt
Net deficit or net surplus for Chicago government entities and (FY 2020)
|City of Chicago||-$38,700,000,000||-$43,100|
|Chicago Public Schools||-$1,800,000,000||-$21,000|
|Chicago Transit Authority||-$16,600,000,000||-$3,500|
|Chicago Park District||-$1,000,000,000||-$2,000|
|Chicago Housing Authority||$862,000,000||$1,000|
|Metropolitan Water Reclamation District of Greater Chicago||-$18,800,000,000||-$600|
|Chicago Community College District||-$3,100,000,000||-$100|
Chicago’s financial woes stem from decades of poor budgeting practices and out of control pension costs. The city’s budget has prioritized programs the city could never afford to implement like a $500 monthly basic income payment to some residents, while raising property taxes on other residents to make up for budget shortfalls. Spending on city pensions has surged nearly 500% since 2004, crowding out the city’s ability to spend on other critical programs and services residents need.
The realities of rising pension costs have caused the city to seek new revenue opportunities to help address the growing gap in funding. The city has approved a casino development specifically for the purpose of increasing revenue to pay for pension costs. But there’s a significant problem with the plan – casino revenue will only account for 9% of the city’s $2.3 billion pension payments. And that’s best-case scenario with no guarantee of actually hitting that revenue benchmark annually.
The city’s chief financial officer, Jennie Huang Bennet, said the casino cash will “reduce the likelihood that the city will need to raise property taxes in the future for pensions.” But covering just 9% of pension costs will leave the city looking for more revenue, and the most likely source is property taxes. Chicago’s property taxes almost doubled in the past decade and rose 30% faster than those in suburban Cook County over the past two decades. History shows Chicagoans should be prepared to experience continued increases despite the optimistic outlook for casino revenue to address pension costs.
Mayor Lori Lightfoot has danced around the biggest issue facing city finances, acknowledging aspects of the current pension system, like the automatic 3% cost-of-living adjustments, are “unsustainable.” But Lightfoot has always stopped short of proposing a specific, realistic solution to the city’s pension woes, which requires structural reforms to address. Without pushing for a constitutional amendmentallowing for those structural reforms, Chicago will never be able to keep up with its rapidly rising pension costs. Between more property tax increases and its new casino lawmakers will barely address the massive debt.
Given that most of the city’s debts are directly tied to the cost of union benefits, Chicagoans should be wary heading to the polls in November. Amendment 1 would guarantee high debt and rising taxes are enshrined in the state constitution by giving unions even more power than they already have. The negative financial implications of Amendment 1 are among the many reasons voters should reject the measure."
Read the full article on: Illinois Policy