Chicago Receives Failing Grade on Fiscal Health
A new report issued a failing "F" grade to the city of Chicago for its fiscal health. The assessment highlighted significant challenges in the city's budget and resource management, raising concerns about Chicago's long-term financial stability and the potential impact on future city services.
- The city's financial shortfall amounts to $41.1 billion, which breaks down to a burden of $42,600 per taxpayer. This calculation is based on the city's assets versus its bills, with unfunded pension and retiree health benefits being the principal liabilities. - Unfunded pension liabilities are a primary driver of the poor fiscal health, with the city's pension funds for police, firefighters, municipal employees, and laborers having only about 25 cents set aside for every dollar of promised benefits. In total, Chicago's pension debt stands at approximately $35.9 billion. - A recent state law aimed at increasing retirement benefits for police and firefighters is expected to add more than $11.6 billion to the city's long-term pension liability. This could further decrease the funding ratio of those two pension funds from 25% to 18%. - Compared to other major U.S. cities, Chicago's taxpayer burden is the second-highest among the 75 most populous cities, trailing only New York City. However, the report notes that Chicago's financial statements do not include entities like Chicago Public Schools, which would present an even weaker financial position if included. - The city's 2025 budget is $12.4 billion, a 40% increase from the $8.9 billion budget in 2019, with a significant portion of the growth attributed to rising pension costs. - Mayor Brandon Johnson has acknowledged the city's financial challenges, stating that finances have reached a "point of no return" and has pointed to the need for new progressive revenue sources. - In response to a projected $1.15 billion deficit for 2026, the Johnson administration has proposed new taxes on large corporations and the wealthy, alongside over $200 million in cost reductions through measures like a targeted hiring freeze and consolidating city real estate. - The city's accounting practices have been criticized for obscuring the true financial condition by not including all incurred expenses in the budget, counting borrowed money as revenue, and keeping pension costs "off the books."
