Chicago’s aldermen pushed back against Mayor Brandon Johnson (D). Ahead of a Dec. 31 deadline to fund city government, the council passed an alternative budget over the weekend that discards some of the mayor’s worst ideas. It’s not ideal, but in a city where aldermen have typically allowed mayors to get their way, the council deserves credit for showing spine.
Johnson’s proposal to close a deficit over $1 billion leaned heavily on gimmicks like slashing the extra contributions the city has been making to shore up its underfunded pensions and a corporate “head tax” on large employers of $33 per employee, per month — effectively punishing firms for creating jobs. It epitomized the sort of short-term thinking that got America’s third-largest city into its current predicament.
The council’s budget dropped the head tax and looks to raise revenue by selling uncollected city debts to debt collectors, seeking further operating efficiencies, selling ad space on city infrastructure, and raising taxes on liquor, ridesharing and video games.
The best that can be said about this plan is that it’s better than what was on the table. The deeper issue is that Chicago needs more than tweaks. This package does nothing to address the core reasons Chicago perennially finds itself in this mess: stagnant growth, out-of-control spending and underfunded pensions.
A recent report from the Milken Institute ranked Chicago in the bottom tier of cities for economic opportunity and growth in jobs, wages and the high-tech industries of the future. Yet the city keeps spending like a boomtown. The budget has grown by over $6 billion since 2019.
Chicago’s history of imprudent decision-making leaves little fiscal room to maneuver. Forty percent of the city’s budget is consumed by debt service and pension contributions, compared to 17 percent in New York City and 11 percent in Los Angeles.
Entering 2025, the pensions for police, firefighters and municipal unions only had about a quarter of the assets needed to cover future obligations. The state legislature made that problem worse this year by passing a “sweetener” for police and firefighters that made the politically powerful unions happy but added $11.1 billion in total liabilities through 2055, dropping asset levels below 20 percent of what will be required.
That leaves the Windy City with few good choices. Illinois already has one of the highest state and local tax burdens in the country, without the tech and finance hubs that let New York and California get away with worse tax burdens. Voters could respond to even higher levies by simply moving. For the same reason, it cannot afford to let the quality of core municipal services erode, whether police, schools or trash collection, since people with choices rarely choose to pay top dollar for poor service.
And the city can’t even declare bankruptcy. Illinois lacks a municipal bankruptcy statute, and the state constitution forbids local governments from reducing pension benefits.
Would anyone actually bet on the rest of the country being willing to bail out Chicago when its debts come due? The city needs a more muscular budget process, including a stronger independent budget office. It needs to rein in borrowing, but the city also needs the option to declare bankruptcy, including the ability to reduce future pension benefits, if only to reduce incentives for unions to make crazy demands.
What this really means is that Chicago needs more politicians who treat budgeting as a way to plan for the future, rather than an opportunity to steal from it.
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