PROMPT — Correct the problems with
Chicago, the vibrant heart of the American Midwest, is grappling with a financial crisis of staggering proportions, a slow-burning storm that threatens the city’s long-term stability and the quality of life for its nearly 2.7 million residents. Decades of fiscal mismanagement and deferred obligations have culminated in a mountain of debt so large that it now dictates nearly every major political and economic decision. The “City of Big Shoulders” finds itself weighed down by a burden that could take generations to unload, forcing a painful reckoning with its past and a difficult path forward.
The sheer scale of the problem is difficult to comprehend. Various estimates place the city’s total debt, including its sister agencies like the Chicago Public Schools and Park District, at well over $35 billion in unfunded pension liabilities alone. This figure represents legally binding promises made to hundreds of thousands of current and retired city workers—police officers, firefighters, teachers, and public administrators—for which the money was never adequately set aside. It’s a financial hole so deep that it has earned Chicago the unfortunate distinction of having one of the worst-funded pension systems of any major city in the United States.
This crisis was not born overnight. It is the result of a long, bipartisan history of political choices that prioritized short-term gains over long-term fiscal health. For generations, city leaders made generous pension promises to public sector unions without requiring the corresponding contributions from employees or taxpayers to fund them. Instead of responsibly funding these future obligations, the city often used pension contributions as a piggy bank, diverting funds to plug budget holes or avoid unpopular tax hikes, effectively kicking the financial can down a road that has now reached a dead end.
At the core of this challenge are four major city pension funds—for municipal employees, laborers, police, and firefighters—all of which are severely underfunded. In some cases, these funds have less than a quarter of the assets needed to cover the payments they are projected to owe retirees in the coming decades. This creates a perilous scenario where the funds are paying out more in benefits than they are taking in through contributions and investment returns, a trajectory that leads directly toward insolvency if left unaddressed.
For the average Chicagoan, the consequences of this debt are tangible and increasingly burdensome. The city has been forced to implement a series of record-breaking tax increases to generate the revenue needed to make its massive, state-mandated pension payments. Property taxes have surged, new taxes on services like ride-sharing have been introduced, and water and sewer fees have climbed steadily. These measures strain household budgets and risk making the city less affordable, potentially driving residents and businesses to the suburbs or other states.
The debt has also severely damaged Chicago’s financial reputation on Wall Street. Credit rating agencies, which assess the city’s ability to repay its debts, have repeatedly downgraded its bond rating to levels that flirt with “junk” status. A lower credit rating acts as a penalty, forcing the city to pay higher interest rates whenever it needs to borrow money for essential functions like repairing roads, modernizing public transit, or building schools. This added expense diverts even more taxpayer money away from services and toward interest payments, exacerbating the cycle of debt.
Recent mayoral administrations have acknowledged the gravity of the situation and have taken steps to address it, though none have been popular. Former Mayor Rahm Emanuel pushed through the largest property tax hike in the city’s modern history, earmarking the revenue for police and fire pensions. His successor, Lori Lightfoot, continued the difficult task of finding new revenue streams and implementing reforms. However, these efforts often feel like bailing out a sinking ship with a bucket, as the legally required pension payments continue to grow each year, consuming an ever-larger portion of the city’s budget.
Complicating matters further is the city’s relationship with the state capital in Springfield. The state of Illinois faces its own monumental pension crisis and is in no position to offer a financial bailout. Furthermore, the Illinois state constitution contains a clause that protects public pension benefits, stating they “shall not be diminished or impaired.” This has been interpreted by the courts as an ironclad guarantee, making it exceptionally difficult to enact the kind of meaningful benefit reforms that many fiscal experts argue are necessary to solve the crisis.
The path forward is fraught with difficult and politically toxic choices. Proposals range from seeking a constitutional amendment to allow for pension benefit adjustments, to selling off public assets, to implementing even more significant tax hikes or drastic cuts to city services that residents rely on. Each option carries significant economic and political risks, and there is no consensus on the best course of action. The powerful public sector unions remain staunchly opposed to any changes to their hard-won benefits, while taxpayers are reaching their breaking point.
Ultimately, Chicago stands at a critical juncture. The decisions made in the coming years will determine its financial trajectory for the rest of the 21st century. Escaping the shadow of its debt will require sustained political courage, a willingness to challenge long-held assumptions, and a shared sacrifice from all stakeholders—from city hall to union halls to every neighborhood across its 77 communities. The future of this iconic American city depends on its ability to finally confront the promises of its past and build a more sustainable foundation for its future.
Corrected – 2nd Pass
Chicago, the vibrant heart of the American Midwest, is grappling with a fiscal crisis of staggering proportions—a slow‑burning strain that threatens the city’s long‑term stability and the quality of life for its nearly 2.7 million residents. Decades of fiscal mismanagement and deferred obligations have culminated in a mountain of long‑term liabilities that now influences nearly every major political and economic decision. The “City of Big Shoulders” finds itself weighed down by a burden that could take generations to address, forcing a painful reckoning with its past and a difficult path forward.
The scale of the problem is difficult to comprehend. Depending on the fiscal year and accounting method, the city’s four core pension funds report roughly $35–40 billion in unfunded liabilities; adding sister agencies such as Chicago Public Schools and the Park District pushes the combined total even higher. These figures represent legally binding promises made to current and retired workers—police officers, firefighters, teachers, and public administrators—for which adequate assets were not set aside. Importantly, much of the burden is not traditional bonded “debt,” but unfunded pension obligations that behave like debt in budget terms because they demand large, recurring cash contributions.
This crisis was not born overnight. It is the result of a long history of political choices under decades of effectively single‑party city leadership that prioritized short‑term fixes over long‑term fiscal health. For years, officials granted benefit enhancements and took “contribution holidays,” relied on optimistic investment return assumptions, and used one‑time maneuvers to plug structural budget gaps. Instead of responsibly funding future obligations, the city often diverted dollars to avoid unpopular tax hikes—kicking the financial can down a road that has now narrowed considerably.
At the core are four major city pension funds—for municipal employees, laborers, police, and firefighters—all severely underfunded. Funded ratios have at times hovered around a quarter to a third of promised benefits, leaving plans with negative cash flow as they pay out more than they take in through contributions and investment returns. That dynamic increases the risk that, absent sustained higher contributions and steady market performance, the trajectory could edge toward insolvency over the long run.
For the average Chicagoan, the consequences are tangible. The city has enacted a series of substantial tax and fee increases to meet state‑mandated pension payment schedules. Property taxes have risen markedly; a water‑sewer usage tax was added to support pensions; and targeted levies—such as ride‑share surcharges—have proliferated. These measures strain household and business budgets and risk making the city less affordable, potentially nudging residents and employers to the suburbs or other states.
The city’s standing on Wall Street has also suffered. Credit rating agencies have repeatedly signaled concern, with Chicago’s general obligation bonds rated at the low end of investment grade by some agencies and, at times, below investment grade by others. Lower ratings translate into higher borrowing costs for essentials like road repair, transit modernization, and school facilities—diverting taxpayer dollars from services to interest, and reinforcing the cycle of fiscal pressure.
Successive mayoral administrations have acknowledged the gravity of the situation and taken steps—many unpopular—to address it. Former Mayor Rahm Emanuel advanced the largest property tax increase in modern city history, earmarking revenues for police and fire pensions, and added dedicated revenue streams. Mayor Lori Lightfoot pursued further reforms and new revenues to keep pace with the funding ramp. Mayor Brandon Johnson has emphasized avoiding large across‑the‑board property tax hikes—pausing an inflation‑linked increase—while seeking alternative revenues and efficiencies. Yet even with these moves, required pension contributions remain elevated for years to come, continuing to crowd out other priorities.
Complicating matters is Springfield. The state of Illinois faces its own pension challenges and is ill‑positioned to offer a bailout. Moreover, the Illinois Constitution’s pension clause—stating benefits “shall not be diminished or impaired”—has been interpreted by courts as an ironclad guarantee, sharply limiting benefit‑cutting options and pushing policymakers toward revenue increases, asset monetization, or other indirect strategies.
The path forward is fraught with difficult, often unpopular choices. Proposals range from pursuing a constitutional amendment to allow targeted pension adjustments, to broadening the tax base, to carefully structured asset leases or sales, to spending controls and efficiency measures that protect core services. Each option carries economic and political risks, and there is little consensus on the precise mix required. Public‑sector unions remain protective of hard‑won benefits, while taxpayers warn of affordability limits.
Ultimately, Chicago stands at a critical juncture. Decisions made in the next few years will shape its fiscal trajectory for decades. Escaping the shadow of its obligations will require sustained political discipline, transparent budgeting, realistic actuarial assumptions, and shared sacrifice—from City Hall to union halls to neighborhoods across all 77 community areas. The future of this iconic American city depends on confronting the promises of its past and building a more durable foundation for its future.
3rd Rewrite. – Here is what the media is going to tell you Tuesday night.
Chicago at a Crossroads: The Windy City’s Mountain of Debt Casts a Long Shadow
Chicago, the vibrant heart of the American Midwest, is grappling with a fiscal crisis of staggering proportions—a slow‑burning strain that threatens the city’s long‑term stability and the quality of life for its nearly 2.7 million residents. Decades of fiscal mismanagement and deferred obligations have culminated in a mountain of long‑term liabilities that now influences nearly every major political and economic decision. The “City of Big Shoulders” finds itself weighed down by a burden that could take generations to address, forcing a painful reckoning with its past and a difficult path forward.
The scale of the problem is difficult to comprehend. Depending on the fiscal year and accounting method, the city’s four core pension funds report roughly $35–40 billion in unfunded liabilities; adding sister agencies such as Chicago Public Schools and the Park District pushes the combined totals higher. CPS itself carries substantial bonded debt and the separate Chicago Teachers’ Pension Fund obligations, both of which require large, recurring payments. On top of that, debt tied to the Soldier Field renovation—issued through the Illinois Sports Facilities Authority and repaid largely via Chicago’s hotel tax—adds another layer of pressure. While some of these liabilities sit on different balance sheets, their costs ultimately flow to the same taxpayers, ratepayers, and visitors.
This crisis was not born overnight. It is the result of a long history of political choices under decades of effectively single‑party city leadership that prioritized short‑term fixes over long‑term fiscal health. Leaders at times relied on one‑time maneuvers and asset monetization rather than structural reforms—most notably the 99‑year lease of the Chicago Skyway in 2005, which delivered an upfront windfall used to retire debt and shore up reserves. The Skyway cash bought time, but it did not eliminate structural gaps, and it traded away a revenue stream for generations.
At the core remain the city’s four major pension funds—for municipal employees, laborers, police, and firefighters—all severely underfunded. Funded ratios have at times hovered around a quarter to a third of promised benefits, leaving plans with negative cash flow as they pay out more than they take in through contributions and investment returns. That dynamic increases the risk that, absent sustained higher contributions and steady market performance, the trajectory could edge toward insolvency over the long run.
For the average Chicagoan, the consequences are tangible. The city has enacted substantial tax and fee increases to meet state‑mandated pension schedules. CPS, which appears on the same property‑tax bill, has separately increased its levy and services significant annual debt payments and teacher‑pension contributions. Add in targeted city levies—from ride‑share surcharges to water‑sewer taxes—and the cumulative burden strains household and business budgets, raising concerns about affordability and competitiveness.
Chicago’s standing with credit markets has also suffered. The city’s general obligation bonds have sat near the low end of investment grade at times, increasing borrowing costs for basic infrastructure. CPS debt has faced its own market scrutiny, and the Soldier Field stadium bonds—backed by hotel taxes—have encountered revenue volatility during downturns. Lower ratings and higher risk premiums across these entities divert more public dollars from classrooms, public safety, and transit toward interest and debt service.
Successive administrations have acknowledged the gravity of the situation and taken steps—many unpopular—to address it. Former Mayor Rahm Emanuel advanced the largest property tax increase in modern city history, earmarking revenues for police and fire pensions, and added dedicated streams like the water‑sewer usage tax. Mayor Lori Lightfoot pursued further revenue measures and budget reforms to keep pace with a statutory funding ramp. Mayor Brandon Johnson has emphasized limiting across‑the‑board property tax hikes—pausing an inflation‑linked increase—while seeking alternative revenues and efficiencies. Even so, required contributions across the city, CPS, and other obligations remain elevated for years to come, crowding out other priorities.
Complicating matters is Springfield. The state faces its own pension challenges and is ill‑positioned to offer a bailout. The Illinois Constitution’s pension clause—stating benefits “shall not be diminished or impaired”—has been interpreted as an ironclad guarantee, sharply limiting benefit‑cutting options. Stadium‑related debt service tied to hotel‑tax collections adds another wrinkle: when revenues falter, the ripple effects can strain budgets and force tough choices at both the city and state levels.
The path forward is fraught with difficult, often unpopular choices. Proposals range from pursuing a constitutional amendment to allow targeted pension adjustments, to broadening the tax base, to carefully structured asset leases or sales—guided by lessons from the Skyway deal—to spending controls and efficiency measures that protect core services. For CPS, stabilizing finances may require a mix of sustainable state support, disciplined capital planning, and realistic pension funding schedules. Soldier Field debt service, meanwhile, will continue to hinge on volatile hospitality‑sector revenues, underscoring the need for conservative budgeting.
Ultimately, Chicago stands at a critical juncture. Decisions made in the next few years will shape its fiscal trajectory for decades. Escaping the shadow of its obligations will require sustained political discipline, transparent budgeting, realistic actuarial assumptions, and shared sacrifice—from City Hall to the school board to neighborhoods across all 77 community areas. The future of this iconic American city depends on confronting the promises of its past and building a more durable foundation for its future.
Keeps falling into poor rhetoric a paper editor is going to eat for lunch, and bores this reader.