Although Chicago managed to evade an increase in property taxes, the city’s leaders were forced to incorporate other tax and fee surges in order to approve the 2025 budget. Diagraming a roadmap for the future, it’s paramount that the city avoids falling into the same fiscal pitfalls again. Presently characterized by a frantic, taxpayer-burdensome approach, Chicago’s annual budgeting should embody a calculated, responsible process. This could be possible if the city’s leaders made a concerted effort in three main areas: trimming off non-critical personnel, reducing expenditures on non-critical ventures and advocating for a revolutionary reform in government pensions.
The proposed $300 million property tax surge didn’t come to fruition, but the 2025 financial plan does carry an extra $181.6 million in other taxes and fees. Rather than addressing the long-standing structural shortcomings triggering the city’s severe deficit, the proposed budget skirts around these problems. The chronic economic hurdles faced by Chicago primarily revolve around: imprudent investment in ineffective projects and programs, surplus non-critical staff at the expense of crucial public safety roles and a heavy reliance on temporary fiscal strategies which only exacerbate the financial instability in the long run.
The predicament is further amplified by the city’s excessively generous pension commitments. If unchecked, the city’s deficit, apart from the pension gap, is forecasted to escalate anywhere between $1.1 billion in 2026 to almost $2 billion in 2027, hinging on that year’s economic performance. To bring much needed relief to Chicago’s beleaguered taxpayers, the city needs to boldly slash spending while investigating sustainable solutions.
In 2025, the city aims to implement cuts amounting $154.5 million, but a bulk of this is just deferring its debt obligations, merely extending the interest that the city will eventually have to pay. While the city’s planned ‘structural overhauls and operational efficiencies’ are slated to save roughly $500 million in 2025, the specifics of these measures remain fuzzy, leaving the sustainability of such savings in question. By 2026, the city will no longer have the cushion of millions in federal pandemic relief funds to offset its budget.
There are three key strategies that Chicago can adopt to ensure fiscal discipline and prevent overspending. First lies in downsizing the non-essential workforce. A significant aspect of the city’s budget, amounting to $4.2 billion, is taken up by personnel costs, which have risen by nearly $750 million since 2019. Additionally, the largest portion of the tax- and fee-supported corporate fund, standing at $3.5 billion, is also attributed to personnel costs.
In its initiative to curb these expenses, the city has consistently targeted cuts to public safety. Since 2019, more than 2,100 public safety roles were cut, while administrative positions and corresponding costs rose by 184 and $145 million, respectively. In order for the personnel costs to align with taxpayers’ affordability, the city needs to significantly reduce non-critical staff. This necessitates strict control over administrative expansion and freezes on hiring for such roles. Furthermore, sectors beyond public safety need to see personnel reductions to allow the city to address its persistent crime issue effectively.
Secondly, expenditures on non-critical projects should be curtailed. The largest increase in the budget has come from non-staff costs, primarily supporting the city’s infrastructure initiatives and schemes. These costs have soared since 2019, accumulating nearly $3.5 billion. Approximately $1.5 billion of $6.5 billion non-staff costs are funded by the corporate fund.
Supplementing these non-personnel expenditures are fee hikes for city services. Many city projects have consistently gone over budget, for instance, one such venture had already exceeded its budget by $1.5 billion, resulting in a series of service fee hikes. Investments into such projects have been marked by poor returns. To remedy these exorbitant non-staff costs, the city needs to abolish non-critical initiatives and thoroughly scrutinize the cost-benefit ratio of proposed projects. The establishment of a dedicated task force to analyze fund distribution and determine a justifiable level of non-staff spending can help restore fiscal sanity.
Lastly, the escalating pension crisis needs to be urgently addressed. From the total budget, pensions account for $2.92 billion, with more than $1.6 billion being funded through property taxes. Compared to five years ago, the city’s pension costs have amplified 4.7 times. Despite this massive outlay, Chicago’s pension funding is worryingly insufficient.
The city must champion an amendment to the state constitution to curtail future government pension cost rise. Failing to do so will lead to system failure or demand enormous taxpayer cash infusions. City leaders should leverage their influence on the governor and the state General Assembly to put forth such constitutional amendment for voter consideration.
To rehabilitate its finances, the city must abandon its habitual reliance on temporary solutions and deferring hard financial decisions, like servicing debt and curtailing expenditures. Currently, each taxpayer in Chicago shoulders a debt of $40,600 as per the Trust in Accounting calculations. Unrestrained spending by the city is the root of the problem.
Without comprehensive reforms, residents and businesses in the city will remain stifled under the escalating tax burden or might even contemplate moving out. Without action, we inch closer towards a fiscal disaster no amount of budgetary gymnastics could avert.