Editorial: Chicago needs to fix its spending problem

The Editors, Bloomberg Opinion on Oct 25, 2025

Published in Op Eds

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Chicago, the city of broad shoulders and big ambitions, is facing a series of self-made calamities. Among them is a fiscal crunch that may soon become a crisis.

In recent years, Chicago has lagged the U.S. in job creation, wage growth and other key metrics while surpassing its peer cities in violent crime. Chronic budget shortfalls and the country’s most underfunded pensions have left it with the lowest credit rating of any major U.S. city, including Detroit, which went bankrupt in 2013.

Worse awaits: A $36.5 billion liability racked up by the city’s four municipal pension funds, just 26% funded, is set to increase by $11.6 billion after the state restored some benefits that had been reduced 15 years ago. Ratings companies and bondholders have started sounding the alarm.

Meanwhile, high-profile employers — including Boeing Co., Caterpillar Inc. and Citadel LLC — have been fleeing the city, beset by high taxes, red tape, poor governance and chronic lapses in public safety. Even the Chicago Bears are skipping town.

Mayor Brandon Johnson’s latest budget proposal seems likely to worsen all these problems. Facing a $1.2 billion deficit, the plan includes a slew of tax increases targeting big employers, “the ultra-rich” and technology companies, all while offering nearly no lasting solutions for Chicago’s out-of-control spending.

City and state officials need to come up with a more realistic agenda to put Chicago back on track. Their goals should be threefold: slashing costs, stabilizing pensions and stimulating growth.

By far, the city’s biggest driver of costs — making up more than 66% of its main discretionary budget — are the wages and benefits promised to its heavily unionized workforce. Personnel costs are projected to rise 14% next year, largely because of contracts reached with more than 40 different unions. No budget fix is possible without confronting these expenses.

A concerted effort to freeze nonessential hiring, curb overtime, impose furloughs and renegotiate benefits might’ve saved more than $300 million, according to a task force the mayor convened earlier this year. Unfortunately, Johnson failed to follow through, proposing merely a one-year freeze, some limits on police overtime and savings from unspecified tech upgrades. This is a formula for more of the same.

An even harder challenge will be pensions, which already absorb 14% of the main budget. Here the mayor offered little aside from a hoped-for infusion from casino taxes. If they want to forestall a crisis, state legislators will have to be willing to amend laws and constitutional provisions that make it all but impossible to reduce future obligations (for instance, by offering “hybrid” pensions that move workers toward defined-contribution plans). Unions, for their part, should recognize that their generous benefits are only “guaranteed” so long as the funds remain solvent.

Of course, budget fixes alone won’t restore Chicago’s vitality. For that, the city needs private enterprise — “the toil of piling job on job,” in the poet’s words. In this respect, Chicago is well placed: It’s home to major research universities, cultural institutions and financial exchanges. It remains a preeminent shipping hub. A roster of big-time corporations — AbbVie Inc., McDonald’s Corp., United Airlines Holdings Inc. — still call the city home, as do many tech companies.

Building on these assets will be crucial. Along with rededicating itself to public safety, the city government should make a concerted effort to reduce permitting delays, streamline zoning, ease development and otherwise welcome new businesses; the mayor’s “cut the tape” initiative is on the right track. It should also commit to avoiding further corporate tax increases, which will never come close to solving the city’s budget problems.

Most of all, Chicago’s leaders must accept that the city government exists to serve constituents, not to provide jobs and benefits to public-sector workers. Business as usual is all too likely to end in disaster.

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