What to know for Chicago Mayor Lightfoot’s “State of the City” address

August 27, 2019

IPI experts available for comment ahead of Thursday's "State of the City" address

CHICAGO (Aug. 27, 2019) – Pension reform and reasonable labor contracts are the answers to Chicago’s nearly $30 billion net deficit, according to a new Illinois Policy Institute analysis.

The Institute found pensions and personnel costs are the No. 1 cost-drivers of the city’s budget deficit, consuming $5.2 billion total, or nearly 60% of the city’s $8.9 billion local revenues this year.

The analysis examines the magnitude of these costs and provides recommendations for Chicago Mayor Lori Lightfoot ahead of Thursday’s “State of the City” address.

Experts from the nonpartisan Illinois Policy Institute are available for media interviews in Chicago, Springfield and across Illinois.

WHAT TO KNOW:
Pensions

  • Total debt in Chicago-controlled pension funds is $29.2 billion. Including the other four pension systems Chicago taxpayers are on the hook for, that burden rises to $41.8 billion, more than 44 U.S. states.
  • When tallying all Chicago and Illinois debt, each Chicago taxpayer owes $119,000, the highest taxpayer debt burden among the 10 most populous U.S. cities.
  • City-controlled pension funds are only 25% funded.
  • 100% of Chicago’s property tax revenues will go toward pensions as well as principal and interest payments on city debt.
  • Chicago’s pension contributions are set to spike twice during the next decade: In 2021, pension contributions could reach $1.67 billion, about $5 million higher than this year’s contributions. By 2023, pension contributions could reach over $2.1 billion, roughly a $1 billion increase from just four years earlier.
  • The city’s structural budget deficit dates back to at least 2005. Since 2011 the city’s expenses have exceeded revenues.
  • Personnel-related expenses consume the largest portion of the city’s budget, costing the city nearly $3.9 billion per year. Police and firefighters represent 38.5 percent and 14.6 percent, respectively, of the city’s workforce and a majority of its personnel expenses.
  • During former Chicago Mayor Rahm Emanuel’s term, Chicagoans suffered $864 million in annual tax increases through property taxes, water and sewer fees, and the 911 surcharge.
Quote from Adam Schuster, director of budget and tax research for the nonpartisan Illinois Policy Institute:“Mayor Lori Lightfoot is in a precarious position, and Chicago’s legacy of debt and its massive pension crisis make it difficult to balance a budget. These are the issues that must be addressed to get out of this hole. Mayor Lightfoot has the platform and the power to do something that would change the trajectory of Chicago and Illinois’ futures: She could lead the charge for true pension reform by calling on Springfield to amend the state’s constitution.

“More taxes are the last thing Chicago needs. With four years of population loss driven by one of the nation’s highest combined state and local tax burdens, we can hardly afford further tax increases. Balancing Chicago’s budget will only get harder each year until Illinois gets serious about solving its state and local pension crises. And until then, taxpayers will either be forced to suffer or join the exodus.”

To read the Illinois Policy Institute’s full analysis of Chicago’s finances and recommendations to improve them, visit https://illin.is/2zmeORw.

For bookings or interviews, contact media@illinoispolicy.org or (312) 607-4977.