While all eyes are focused on a solution for Illinois’ state-run pension systems, Chicago’s own debt crisis is looming.
Chicago taxpayers are on the hook for more than $63 billion in pension, health insurance and other debt. That’s the total debt of the city and its sister governments, as well as Chicagoans’ share of Cook County debt.
In total, each Chicago household is on the hook for more than $61,000.
Chicago’s pension crisis isn’t new, but Detroit’s bankruptcy has brought national attention to Chicago’s growing crisis. Just a day after Detroit filed for bankruptcy, Moody’s Investors Service downgraded Chicago’s debt by a rare three notches. Chicago is now just four notches away from junk-bond status — and any further downgrades mean the city could face problems borrowing money.
Standard & Poor’s Rating Services followed late last week by threatening its next downgrade. It placed the city’s debt on a “negative outlook.”
Without pension reform, Chicago Mayor Rahm Emanuel will be forced to raise taxes or dramatically cut government services.
Emanuel knows he can’t raise taxes. Chicago has lost more than 200,000 residents in the last decade and the city’s population is lower now than it was in the 1920s. America’sslowest-growing major city can’t afford to chase away even more taxpayers.
To make matters worse, Chicago’s services are already faltering. Chicago Public Schools closed nearly 50 schools this year, forcing children and families to travel across gang lines. Nearly 3,000 school employees have been laid off. And the city’s crime rate is among the worst in the nation.
Higher taxes, taxpayer flight and an inability to provide core services contributed toDetroit’s demise — and it’s a trend that Chicago must reverse.
Fixing Chicago’s pension crisis will require help from Springfield. Lawmakers need to follow the lead of the private sector and move all workers to 401(k)-style plans for all work going forward — an idea that Emanuel supports as an option for the city’s new hires.
Vice President of Policy
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P.S. View the full report — The hidden bill: Chicago taxpayers and the looming crisis.