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Before allowing Chicago property taxes to rise, mayor should demand changes to pensions

Chicago is the beating heart of Illinois and, like every other city in Illinois, held captive by state-level mandates on public pensions. They are driving services down and taxes up.

Mayor Lori Lightfoot presents her proposed 2022 city budget to the Chicago City Council on Sept. 20, 2021.
Ashlee Rezin/Sun-Times

It’s budget season again in Chicago. With an influx of federal aid to the tune of $3.5 billion, taxpayers should rest easy — right?

Not so much.

Mayor Lori Lightfoot’s budget proposal includes a $76.5 million increase in the city’s property tax levy, which would cost the typical Chicago family up to $180 per year. This follows a $94 million property tax hike in Lightfoot’s last budget and a nearly $600 million increase under her predecessor, Mayor Rahm Emanuel, in 2015.

Driving these increases is spending on the city’s public pensions, which has increased 239% over the decade, despite spending for city services only growing 18% during the same time.

The city and its mayor must break the mold instead of following the same failed fiscal path. Chicago is the beating heart of Illinois and, like every other city in Illinois, it’s held captive by state-level mandates on public pensions that are driving investments in services down and taxes up.

If there were any time to call for change, it’s now.

Chicago’s pension costs next year will consume more than $2.3 billion of the city’s budget. That’s 21.4% of the city’s own source revenue, excluding state or federal grants. It’s a more than $967 million increase in pension spending since Lightfoot became mayor and $461 million more than last year, a spike that accounts for 63% of the $733 million fiscal year 2022 budget deficit reported by Lightfoot in August.

And yet, Lightfoot’s budget address did not include any call for pension reform, which requires Springfield to send a constitutional amendment to voters. This comes despite her statements in May that the pension crisis was the city’s “biggest problem” and “unsustainable in its current form.”

New polling indicates why Lightfoot should feel emboldened to demand change in Springfield. A recently released poll from Echelon and commissioned by the Illinois Policy Institute shows that 61% of registered Illinois voters support pension reform through a constitutional amendment that would protect benefits retirees have already earned while allowing for changes in future benefits. This represents enough voters to pass an amendment if it were on a ballot.

It’s not hard to understand why people want this fix. Pension reform would put an end to continuous, painful and unpopular property tax hikes in the city. It would protect retirees in the city’s four pension funds that are, on average, only 25% funded.

It would also ensure services survive that city residents want and need. Lightfoot’s new budget increases spending by roughly $1.2 billion on a range of city services from the Chicago Police Department to affordable housing, expanded mental health services and more.

Unfortunately, that spending is propped up by one-time federal aid that expires by 2024, meaning many programs will have to be financed with significant future tax hikes or cut altogether, continuing the city’s downward trajectory for municipal service quality.

Despite being refreshingly forthright about the severity of the city’s pension crisis, Lightfoot has always stopped short of support for an amendment to the state constitution’s pension clause.

Amending the constitution to allow for adjustments to the future growth in pension benefits for current workers and retirees is the only way for Lightfoot or the many other mayors around the state who are struggling with pensions to get their budgets and tax burdens under control.

Only a long-term balanced budget can give city residents confidence programs will continue and taxes will be affordable.

The people are ready for politicians to tackle pension reform. At this critical moment in the city’s future, Mayor Lightfoot has an opportunity to bring pension reform to fruition, championing the only true fix that will allow Chicago to spend money on things that will keep people here and improve the quality of life in the city — instead of continuing to demand higher taxes to pay down pension debt.

Adam Schuster is the senior director of budget and tax research at the Illinois Policy Institute.

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