Chicagoans Prefer Bankruptcy Over Higher Taxes As City Debt Piles Up
Chicago teachers vote this week on a new $1.5 billion contract, the most expensive teachers contract in city history. But as Chicago teachers head to the ballot box, Chicago residents appear to be getting antsy about the city’s mounting bills. A new poll released today by the Illinois Opportunity Project finds that many Chicago residents are supportive of bankruptcy rather than hiking more taxes to help the city navigate its beleaguered finances.
In addition to paying the $1.5 billion price tag on the new teachers union contract, the city also faces an unfunded pension liability of $150 billion; that’s nearly $150,000 per Chicago household.
“Chicago is not alone. Illinois has dozens of municipalities and local units of government that are near insolvency. Cities from Chicago to Cairo are saddled with unsustainable pension debts. City costs, property taxes, and debt that continues to rise in an unsustainable fashion,” said Matthew Besler, President Illinois Opportunity Project.
The new poll, conducted earlier this month by the Chicago-based polling firm Ogden and Fry found that only 21 percent of Chicagoans support raising taxes to cover the city’s debts. Over 36 percent support using bankruptcy to restructure its debt.
Meanwhile, powerful public-sector unions have little incentive to moderate their financial demands during negotiations because local governments have no authority to declare bankruptcy to get out from under burdensome union contracts.
Illinois courts have consistently protected pension benefits, while Illinois law mandates local pension payments to such an extent that local governments are forced to choose between funding operations and paying for pension debt service.
“Illinois cities need an option that’s fair to taxpayers and provides long-term sustainability for local governments. Allowing municipalities and local units of government to restructure pension debt through bankruptcy would make pension obligations sustainable and affordable; it would also lead to more reasonable negotiating conditions between unions and government,” said Besler.
While politicians continue to write blank checks and do nothing to control the debt, over 40 percent of Chicagoans see the writing on the wall and support changing state law to give municipalities, including the City of Chicago, the option of using bankruptcy to adjust its debt obligations.