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CHICAGO
ALMOST HITS BOTTOM RANK OF 150 CITIES FOR HIGH COST, POOR SERVICES
Illinois Policy Institute/
Luke Schafer
Out of 150 cities, Chicago came in almost
at the bottom when the quality of city services and the total budget per
capita were ranked, confirming what most Chicagoans already knew. |
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 Taxpayers have been asked to pay more for water and sewer use,
3 cents a gallon more for gasoline, rideshares, and other taxes, fines and fees.
Chicago’s 10.25% sales tax is the nation’s highest combined rate for a major
city. Even listening to Spotify or watching Netflix is hit with a 9% amusement
tax.
Then there are property taxes. On average, from 2000 to 2019, residential
property taxes in Chicago rose by 164%. They rose $543 million just during
former Mayor Rahm Emanuel’s term and Mayor Lori Lightfoot in her current budget
added $94 million in property taxes, plus created automatic annual increases
tied to inflation.
So when the cost of city government was compared to the quality, Chicago ranked
141 out of the nation’s 150 largest cities, according to researchers at personal
finance website WalletHub. WalletHub based its rankings on a combination of the quality of city services
and the city budget per capita. It measured city efficiency – whether city
residents were getting a good return for their tax dollars. Low costs and great
services ranked high, while high costs and poorer services ranked low.
 In addition to an overall score, WalletHub provided individual scores for
quality of services and for total budget per capita. Chicago did poorly on both
measures, ranking 136th for cost per capita and 140th for service. By
comparison, Washington, D.C., took the bottom spot because it had the highest
costs, but city services were ranked high. Detroit offered the worst city
services.
Chicago’s heavy tax burden would be less of a problem were taxpayers getting
value for their money. High costs in Seattle and New York City translated into
high quality services, WalletHub found.
So where is the money going?
Chicago’s pension debt is largely to blame for the city’s high expenditures
crowding out the public services taxpayers expect for their money and that can
protect housing values.
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A decade ago Chicago spent $450.5 million on
pensions, 5% of total city spending. In 2021 the city will spend
$1.82 billion on pensions, or 15% of total spending.
The problem will get worse without meaningful
pension reform.
For fiscal year 2022, the city projected its pension contributions
will balloon to $2.25 billion. That amount may underestimate the
problem because Chicago recently adopted actuarially-based funding.
This would represent, at minimum, a $375 million increase. That
amount exceeds the city’s yearly expenditure on City Development,
which includes the Department of Housing, Department of Cultural
Affairs and Special Events, and Department of Planning and
Development.
If the yearly increase in pension payments exceeds amounts spent on
alleviating homelessness, promoting sustainable growth and providing
affordable housing, the city and its residents have a problem. That
problem is expected to grow.
Annual contributions to city pension funds were already projected to
rise by $1 billion during the course of Lightfoot’s first term in
office. Even after the $375 million increase expected in 2022, the
city’s projections in the budget, which run through 2026, show
ever-escalating annual pension contributions.
Despite Chicago’s rapidly rising taxpayer-funded pension payments,
it is unlikely they will be sufficient to meet Chicago’s
obligations. The city’s eight pension funds – including the four
funds to which the city contributes directly and four funds for
related entities funded by the same taxpayers – have accumulated
nearly $47 billion in debt, more than 44 U.S. states. Those pensions
are only 34% funded overall, meaning they have 34 cents saved for
every $1 in future promises. Pension experts consider plans below
40% funding to be past the point of no return and on the path to
insolvency or major cuts.
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