Chicago is a city that knows how to make a comeback. It rebuilt after fire, reinvented its waterfront and turned a once-abandoned rail corridor into one of the most celebrated modern urban parks in the country. So, when our city is struggling financially like it is right now, we know we have what it takes to roll up our sleeves, do the hard work and get things moving in the right direction.
The Civic Committee recently released its new strategic plan for the region, and at its core is a fundamental belief that growth for all is paramount to Chicago’s success as a city. Chicago must grow its economy, attract businesses and residents, and create broad opportunity that lifts the whole region and kick-starts a virtuous cycle of growth. A cornerstone of growth for all in Chicago is ensuring fiscal stability at the city level.
The city has a long way to go on this front. Chicago faces structural budget deficits driven by rising personnel costs as well as pension and debt obligations, which now consume 37 cents of every non-grant budget dollar. Last year’s budget gap was roughly $1.2 billion; this year’s is projected to be nearly $885 million. The city traditionally has addressed these challenges with short-term (and less painful) fixes such as using tax increment financing surpluses to plug budget gaps or borrowing to cover ordinary operating expenses. Unfortunately, patching the gaps year after year with one-time maneuvers does not make the problem smaller — it makes it more expensive.
The city cannot continue to limp from budget to budget without addressing the root causes of its fiscal issues. It must address those challenges head-on to put the city on a more sustainable fiscal trajectory.
In that spirit, the Civic Committee convened a group of business leaders and subject matter experts over the past year and a half to study the root causes of the city’s fiscal issues and develop recommendations for addressing them. We recently released those recommendations in the in-depth report “Chicago’s Fiscal Future: A Roadmap to Reform.” We looked at a myriad of issues, but broadly, they clustered around three themes: pensions, process and governance, and expenditure reductions.
Chicago’s pension problems are well known: The city has $36.6 billion in unfunded pension obligations, and they are collectively only 28% funded, a situation that is among the worst in the country. Chicago’s police officers and firefighters put themselves on the line for this city, and they deserve a secure and dignified retirement. But the way to honor that commitment is to keep the system solvent, not to add obligations the city has no ability to fund. Yet only a year ago, legislators did exactly that, increasing pension benefits for police and firefighters. Our recommendations include not increasing benefits except where required for legal compliance; implementing a voluntary retiree buyout program that could reduce required contributions over the next three decades by more than $700 million; and consolidating the city’s four pension funds into one fund similar to what the state did a few years ago, which could save between $680 million and $3.5 billion over the next three decades.
Under process and governance, four issues stand out. On debt management, adopt a more conservative debt target, structure borrowing to leading practices and reserve debt for capital and infrastructure investments only. The City Council’s recent vote to increase the number of votes required to issue debt from a simple majority to a three-fifths vote is a great example of improving debt management. On the City Council’s role in the budget process, move up the budget deadline, require the budget office to share data and give the City Council a properly resourced budget office.
On police settlements and judgments, reform risk management and change how the city budgets and pays for these costs. On TIF districts, implement comprehensive policies around creation, implementation and evaluation of TIF; explore creative solutions to fund economic development in the future; and improve transparency and governance around the declaration of TIF surpluses.
Finally, there is expenditure reduction. Historically, annual budget debates focus almost entirely on revenues and tax hikes while spending receives far less scrutiny. As a result, expenditures tend to increase largely unchecked — for example, personnel costs increased 42% from 2019 to 2026 despite the number of employees declining. Consulting firm EY highlighted personnel costs as an area of potential expense reduction in its 2025 report, which identified up to $1.4 billion in actionable operational efficiencies, yet nearly all its ideas were shelved. The city must do the hard work of right-sizing its workforce, modernizing back-office operations and implementing the cost savings already on the table.
Before the city asks anyone to contribute more, it must demonstrate it has addressed what is actually broken. That sequencing is deliberate. Too often, revenue increases have served as a way to get through another budget year without fixing what drives the problem.
If the city addresses the root causes of its fiscal issues, it will provide substantial benefit. Every dollar freed from the weight of past obligations is a dollar available for parks, transit, public safety, and the kind of investment that makes businesses want to stay and people want to put down roots — the very conditions that turn fiscal discipline into growth for all.
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Chicago has overcome big fiscal hurdles before and can do it again now if our leaders are willing to make the hard choices necessary to do so.
Mary Wagoner is the vice president of of state and local finance for the Civic Committee.
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