While Mayor Brandon Johnson and the City Council battle over a staggering $1 billion 2025 budget deficit, a related but much larger problem looms. The city — and its public schools — are insolvent.
Two generations of state and city leaders have raised salaries and pensions beyond the capacity of Chicago citizens to pay. Consuming nearly a third of the budget and growing, retiree benefits and debt service are crowding out the city’s ability to provide critical services. Despite endemic violent crime, Chicago has 13% fewer police officers than in 2019. Only half of all spending at Chicago Public Schools reaches classrooms, contributing to poor student achievement.
Conventional wisdom says pension funds have been inadequately funded. In a seminal 2018 report, however, the conservative economic research group Wirepoints documented the real culprit: from 1987 to 2016, the Illinois General Assembly increased pension benefits an astonishing 1,061%, while state revenues grew 176% and median household income 127%.
Currying favor with public sector unions, legislators and governors of both parties raised service-year credits, permitted pensions as high as 75% of final salaries, lowered the retirement age , allowed unused sick days to count as pensionable service, and created the ticking time bomb of compounding annual cost of living adjustments. Gov. JB Pritzker signed bills adding new pension sweeteners costing city taxpayers $100 million annually.
Those pensions are based on skyrocketing salaries. More than 140,000 state and local workers collect six-figure salaries or pensions. The median CPS teacher salary is $95,000, among the nation’s highest; the Chicago Teachers Union is seeking four years of 9% raises. This despite a Tribune Editorial Board investigation showing 40% of CTU teachers are “chronically absent.”
One-third of CPS schools are more than half empty yet the CPS board — a vassal of CTU — has increased salaries and benefits by nearly 50% since 2019, going on a 9,000-staffer hiring spree even as 37,000 more students left the system.
From 2015 to 2023, taxpayers funneled an extraordinary $20 billion into Chicago’s five pension funds only to have the combined debt rise a whopping $24 billion, according to a new Wirepoints analysis. The funded ratio fell from 42% to 30%.
In a desperate attempt to keep up, Chicago mayors and City Councils have cut services, used one-time revenues, and borrowed to plug budget holes while forcing businesses to pay the highest property taxes in the nation. Record tax increases have pummeled city homeowners too; and Chicago is a tenth of a point shy of the highest sales taxes in the nation.
In physics, every action has an equal and opposite reaction. So too in politics. The reaction to Chicago’s high taxes, violent crime, and declining schools has been an out-migration of people, businesses, jobs and wealth. The most affected citizens have led the exodus, including many of the more than 400,000 Black taxpayers leaving Chicago, a loss greater than the population of Cleveland.
Illinois has lost population for 10 consecutive years, even as the nation grows. Its unemployment rate is the third worst in the U.S. Its remaining citizens have fewer job opportunities and less ability to fund soaring government pensions.
Incredibly, leading civic and business groups have joined unions in calling for even higher taxes, including more city levies and a state income tax surcharge to address Illinois’ unfathomable pension debt.
Chicago and Illinois are sinking in a quicksand of pension debt. The more vigorous the struggle to escape, the more debt that consumes the drowning victim.
Any rescue from the muck rests with ordinary citizens taking city and state government back from the politicians serving special interests rather than their own; and shunting aside the go-along-to-get-along business and civic elites settling for decrepitude.
Although painful, the solutions include deep cuts to bloated bureaucracies bleeding taxpayers and adoption of modern management practices; restructuring of pensions to resemble social security, including reasonable caps (the maximum current social security benefit is $45,864); and consolidating dilapidated and academically failing CPS schools into smaller, modern ones.
The Illinois Supreme Court has struck down all pension reforms. Thus, it falls to citizens to petition and adopt state constitutional amendments reestablishing the balance between taxpayers and the public sector unions controlling city and state government. In addition to pension reform, those amendments should ban teacher strikes (like 37 other states), ending the routine hostage taking of parents and taxpayers.
The fix is not easy but it starts with telling the truth: pensions cannot be paid in full. To continue pretending otherwise is to consign a once great city and state to permanent decline.
Forrest Claypool is the author of “The Daley Show: Inside the Transformative Reign of Chicago’s Richard M. Daley.” He served twice as Daley’s chief of staff and was CEO of Chicago Public Schools from 2015 to 2017.
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