When Guggenheim Partners announced this month that it will be relocating to Miami, it joined a growing list of heavy-hitter Chicago firms that have moved out.
That frustrates me.
I know Chicago is a great city. But clearly our elected leaders need to do more to convince Chicagoans and the city’s business leaders they’re going to address our biggest problems. We need to believe we can fix things that make it hard to stay.
Chicago lost 45,175 residents from July 2020 to July 2021. So when it comes to stabilizing Chicago’s economy and reversing the city’s departures, we have a narrow margin for error.
Memorial Day weekend is a week away. What are our leaders going to do to ensure the city is safe for people to enjoy our legendary summers — and for businesses to operate and serve residents and visitors?
People hear Mayor-elect Brandon Johnson calling mid-April’s “wilding” episode, which saw hundreds of teenagers descend on downtown with some of them smashing car windows and two being shot, a display of “silly” behavior. That, plus Johnson’s previous “defund the police” rhetoric does little to inspire residents and the business community things will get better during the next four years.
That has to change. If people don’t feel safe enjoying Chicago, the exodus will be compounded by avoidance.
The business community is likely also rattled by the mayor-elect’s tax proposals, which center on $800 million in new taxes, including a head tax and a financial transactions tax. Gov. J.B. Pritzker indicated recently that most of these proposals are going nowhere, especially the ones needing Springfield’s approval. Still, if Johnson’s only solution to Chicago’s budget problems is to tax people more and more, he’s giving everyone an incentive to consider the exits.
Pritzker says Chicago isn’t getting a free pass to tax its way out of financial problems, but what’s the plan? Has the mayor-elect been in communication with business owners to hear their concerns and build trust and rapport? Johnson desperately needs the business community, big and small, to keep the city humming.
It isn’t fun to take an honest look at the city’s finances, but it’s important we understand what Chicago is up against. As Johnson is set to deliver his first budget this fall, the city’s federal COVID-19 funds will run dry. That means federal funding won’t be available to buoy revenues or close deficits. City leaders no longer will have the healthy cushion they enjoyed the past several years, thanks to the feds.
That’s important to remember, because here is a quick summary of Chicago’s financial challenges.
Chicago is facing a budget shortfall estimated at between $306 million and $951 million for fiscal year 2024. The city has faced a projected budget deficit since at least 2001, despite continued tax hikes and enhanced federal revenues.
Speaking of property taxes, the city’s property tax levy has doubled in the past decade, bringing in $1.73 billion in property taxes today compared with $860 million in 2014. What that really means is rapidly growing, often unaffordable property tax bills for homeowners and commercial property owners.
Pensions are a huge liability for the city and are the main driver behind these property tax hikes. More than 40% of the city budget goes toward pension payments and debt service. Pension contributions as a share of the budget have tripled in the past decade, now at 23% compared with 6.8% in 2014. Despite the massive spike in contributions, pension debt is at an all-time high, and funding ratios are near an all-time low.
“Look as Chicago goes, as you know, so goes the economy of the entire state,” Pritzker told WGN.
He’s right. Chicago is the beating heart of our state. The status quo of more spending and higher taxes hasn’t solved Chicago’s problems. The city is facing a potentially massive deficit, even without factoring in the threat of a recession.
Businesses and people are already heading for the exits, making solving the city’s financial troubles even more imperative. That gets more difficult if Johnson’s only solution is to try to extract more money from those who remain. Tax hikes aren’t the answer; creating a bigger revenue pool is the only way out.
What Chicagoans want from their next mayor is clear — they want a safer, more affordable city. Please, mayor-elect, champion that future.
Matt Paprocki is president and CEO of the Illinois Policy Institute, a nonpartisan think tank based in Chicago.
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