Major Blue City Faces Bankruptcy Crisis from Sky-High Pension Costs!

A chic Midwestern metropolis is grappling with a financial crisis, and the culprits are its overly generous retirement perks for public employees, according to financial experts.

Chicago is staring down a staggering budget deficit of nearly $982.4 million, as highlighted by The Civic Federation.

In their efforts to steer the city away from bankruptcy, politicians have yet to tackle the elephant in the room: the ballooning pension costs for over 40,000 public servants.

‘Retirement benefits are like candy to politicians – everyone loves them, but the consequences don’t hit until much later,’ noted a senior fellow at the American Enterprise Institute. ‘They can devastate a city’s financial future.’

In a bold move to slash the city’s debt, Mayor Brandon Johnson proposed a $300 million increase in property taxes, only to see it rejected by the City Council.

The City Council finalized a budget this month that included far fewer tax hikes than Johnson had envisioned, further complicating the city’s financial picture. In 2022, retirement benefits and debt servicing consumed a whopping 43% of the city’s budget.

Chicago faces a challenging financial landscape due to its generous retirement benefits for public workers

Retirement benefits and debt service accounted for 43% of the city’s budget in 2022

In short, Biggs pointed out that Chicago is stuck paying for yesterday instead of investing in tomorrow.

Several elements are feeding into this pension dilemma, from the age at which employees retire to the amounts they receive, along with the contributions made to their retirement throughout their careers.

A staggering number of Chicago’s workforce, over half, retire before reaching 60, as noted by the Illinois Policy Institute. To illustrate, a city worker who retires after 35 years with an annual salary of $75,000 is set to receive $77,000 each year from their pension and health benefits combined.

The consequences of these financial missteps are palpable throughout the city.

Biggs highlighted that major corporations such as Boeing, Tyson Foods, and Citadel have packed their bags and left Chicago due to the city’s deteriorating ‘business climate’ and pressing public safety concerns.

A lack of funding has also led to diminished public service resources, with the police force dwindling by around 1,600 officers since 2018.

Alarmingly, 49% of 911 calls are reportedly going unanswered, according to a 2023 investigation by the city’s general inspector.

Mayor Brandon Johnson’s property tax increase proposal was rejected by City Council

Growing pension liabilities have exacerbated Chicago’s mounting debt

Biggs painted a stark picture of the city’s financial reality.

He stated, ‘Chicago owes nearly $29 billion to bondholders, and is burdened with $35 billion in unfunded pension liabilities alongside almost $2 billion in unfunded retiree health benefits.’

‘And this staggering total doesn’t even account for an additional $14 billion in unfunded benefits owed to the city’s teachers.’

But this predicament isn’t just a Chicago issue; the entire state of Illinois is feeling the pinch of this pension crisis.

In the past year, the pension debt across Illinois surged from $142.2 billion to $143.7 billion, according to a nonprofit think tank.

In 2023, over 140,000 Illinois government employees and retirees pulled in more than $100,000 in salaries and pensions.

A city employee retiring after 35 years would receive $77,000 annually in benefits

This pension crisis didn’t develop overnight; it’s a problem decades in the making. Back in 1994, former Governor Jim Edgar ‘kicked the can down the road’ by passing a law aimed at addressing the then $17 billion pension shortfall. Unfortunately, this only exacerbated the issue, with the state’s repayment obligations extending all the way to 2045.

As Biggs aptly noted, ‘There may be no feasible way for Mr. Johnson to extricate Chicago from this fiscal quagmire without incurring significant political and economic pain.’

‘However, he, along with mayors of big cities across America, has a moral duty to at least make the attempt.’