Chicago property taxes have doubled in 10 years, thanks to pensions

Chicago’s government pension obligations have increased nearly sixfold since 2014, driving up Chicago’s sky-high property taxes. Another increase for 2025 was likely avoided, but city leaders need state lawmakers to make a permanent fix.

Chicago property taxes have doubled in a decade, and public pensions are to blame.

So now that city leaders stopped residents’ burden from getting even worse, they should start pushing the Illinois General Assembly to initiate a permanent fix. That fix would be to amend the Illinois Constitution so the growth of future pension benefits can be controlled. Otherwise, Chicago property taxes will again be at risk as the city’s 2026 budget is created.

Chicago’s 2025 budget hit major snags when Mayor Brandon Johnson’s office proposed a massive $300 million property tax increase to help plug the city’s nearly $1 billion budget shortfall. The tax hike would have been the second-largest property tax increase in modern city history, only being topped by Rahm Emanuel’s $588 million property tax increase in 2015.

Residents across the city expressed their concerns over the proposal, as Chicagoans already pay some of the highest property taxes in the nation. Aldermen unanimously rejected the initial tax hike. Johnson and aldermen had seemingly compromised on a $68.5 million property tax hike before budget negotiations again broke down. Ultimately, Chicago’s 2025 budget was passed without a property tax increase.

Still, the budgetary pressures that put the city in its precarious financial situation and have led to skyrocketing property taxes persist.

Since 2014, the city’s property tax levy has more than doubled, increasing from $860 million to $1.77 billion in 2024. The main driver of Chicago’s ever-increasing property taxes has been the increase in pension costs for the city. While property taxes have doubled since 2014, pension costs have increased nearly six-fold during that time, up from $478 million in 2014 to $2.75 billion in 2024.

The rapid increase in pension costs has eaten most of the city’s property tax levy and taken money away from other city services, such as the city library, colleges, some note and bond funds in addition to the four city-run pension funds. Pension costs used to consume 41% of the city’s property tax levy, but now take 80% of it. Even worse, on net, every new property tax dollar raised since 2014 has gone towards rising pension costs. All other spending items from the property tax levy have seen a net decrease during the past 10 years, when adjusted for inflation.

The bad news doesn’t end there. While the city’s property tax levy was able to pay for virtually all the city’s annual pension spending, that is no longer the case. The city’s annual pension obligations are set to exceed $2.85 billion, or 161% of the total money raised by the city’s property tax levy in 2024. In other words, even more city funding resources are being drawn in to pay for the city’s pension obligations.

In 2014, pension spending represented just 6.8% of the city’s net appropriation of local funds; the spending that the city controls and is responsible for. The pension share of city spending has grown nearly unabated to 22.4% of the city’s net appropriations of local funds in 2024. Pension costs are now the single-largest line item in the city’s budget, receiving more tax dollars than the police department, fire department or infrastructure.

Despite spending more tax dollars on pensions than anything else in the city’s budget, the four city-run pension funds have each seen their funded ratios drop since 2014. Things have gotten so bad in Chicago’s pension funds that of the nation’s large municipal pension funds, Chicago’s four city-run systems have the lowest funded ratios in the nation, according to the latest estimates from the Equable Institute.

Also, the retirement systems for Chicago’s teachers, water district and transit employees – which residents also pay for – are also among the 10 worst-funded local systems in the nation.

These poor funding ratios show the financial distress the city continues to face. Experts warn funded ratios under 60% are unhealthy and are defined as “deeply troubled.” Funded ratios below 40% are considered past the point of no return and on the way to insolvency, major cuts or massive tax hikes.

All four of Chicago’s core pensions have already crossed the point of no return. They are the only four in the nation to be under 40% funded.

A bipartisan solution that would’ve addressed much of the problem was blocked by the courts in 2015. Since then lawmakers have been unwilling to take any action to fix pensions, which because of the court decision will require them to place constitutional pension reform to a statewide vote.

Local voters are likely to back that change: Barrington Township voters did so with 73% of the vote Nov. 5. Other communities will be asking their voters in April and a suburban mayor is calling for the amendment.

Former Mayor Rahm Emanuel and former Mayor Lori Lightfoot both called on state lawmakers to pursue constitutional pension reform at the end of their terms. Mayor Brandon Johnson and the city’s 50 aldermen now need to leverage their positions to lobby lawmakers to pursue these reforms.

Without them, the city will continue to face annual budget shortfalls, soaring property taxes, and a faltering pension system.