If you know nothing about Chicago’s fiscal problems, take a moment to understand the chart below from Moody’s Investor Services.

It’s really quite simple. It adds up three items — what Chicago pays each year on bonds for borrowed money, healthcare costs for retirees (called “OPEB”) and how much should be paid into its pensions just to stay even without running up bigger unfunded liabilities (called “pension treadwater”). Then it compares that sum to the total of all Chicago revenues.

Just those three items, the chart shows, are about 45% of all the money the city takes in, the worst of all major American cities. That’s assuming that the city really were paying that treadwater number into its pensions, which it’s failing to do.

Chicago, in other words, has iron ball strapped to its back far bigger than most other cities have to carry. When 45% of the city’s revenue is consumed by just those three items, taxes rise to uncompetitive levels and services become inferior.

Moody’s looked at America’s 25 biggest cities. The chart shows only the worst-off five and the best-off five. Chicago’s bonded debt service is about twice the average of those 25 cities. Chicago is worst of all 25 on the pension treadwater number as well as the total of all three items.

And that huge pension cost crowds out the city’s ability to borrow, runs down its credit rating and increases borrowing costs. That was the point of an article this week titled “Pension obligations eat up cities’ fixed cost” in Pensions & Investments, a major trade publication, which centered on that chart.

You’d think that chart or something like it would be a headline story across Illinois, given how simple and compelling it is. We printed a version of it last week as soon as the Moody’s report came out.

Moody’s is hardly alone with that kind of assessment. In fact, a report by a JP Morgan financial expert, published here and in the Wall Street Journal, is even worse. It concluded that if those same three items were properly measured and Chicago measured and amortized its retiree debts the way it should be doing, they’d consume a stunning 60% of the city’s revenue, by far the worst in the nation.

-Mark Glennon



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Poor Taxpayer

The best day of your life is the day you move out of Illinois.
There is no hope, DOA, a goner.
Let the cops, teachers and firemen pay all the pension taxes.
Do not be the last man to move.
The race is on to get out of this hell hole.
HIGH TAXES, LOW SERVICES AND some of the worst weather in the US.
You and your family deserve much better.


Moody’s should adjust their municipal bond ratings to more accurately reflect reality…when bond buyers start pricing debt to reflect the real risk, the day of reckoning will come


Moodys talks one talk then does another. Secretly they relish the fact that Illinois is living on payday loans combined with a legislature willing and able to sell taxpayers down the river and shake down any business creating value here. Moodys responds to the misery here by simply offering ratings based on on the promise to squeeze taxpayers rather than fiscal health. high yield products and a punished taxpayer are the result of these too-favorable ratings. It’s high time Moodys was faced with a big class action lawsuit. Moodys is a payday loan shark.


Illinois is hamstrung by a bevy of befuddled boobs. These loathsome loafers lack legitimacy and logic. Delightfully dim these dolts are driving Illinois directly to doom. What a bunch of asshats.

Gary Shaw

” How much should be payed ” ?? are you serious Mark Glennon… who came last in his English class.??


Also, every one of those cities are run by Democrats!

In the know about the dough

Because Illinois missed the opportunity to change its State Constitution through the “Con-Con” (Constitutional Convention), which happens only every ten years and only in years divisible by 10, the next time that we’ll have a say in anything will be in 2030. And that only if there is a brave enough soul to champion the cause. In the meantime, we’ll just have to accept the “Con” part…


Exactly. I once worked with a total bleeding heart progressive liberal who never voted Republican even once in his life. But when it came time for the constitutional convention years back, even he rejected the idea of allowing the very same liberal democrats HE VOTED FOR tinker with the constitution. Even he said the con-con would just be an excuse to screw things up even more. He didn’t trust liberal democrats to fix anything.


over on the Medicaid thread I read where about 1 in 4 people in Illinois utilize Medicaid.. Based upon that I assume that 1 out of 4 Illinois residents do not pay property taxes. Add to them the number of governmental employees, school employees, politicians and many of those employed in the plaintiff trial lawyer system it is quite easy foe me to see why getting anything passed by election that would change the current status quo is highly improbable. The inevitable end will come when our State financially caves in that would include property taxes considerably higher than they… Read more »


Renters pay property tax even though the tax bill is in the landlord’s name. Real estate taxes are factored into their monthly rent. No competent landlord is charging rent less than the monthly taxes. Only Section 8 doesn’t really pay property tax, but Section 8 subsidized housing is overall a small amount of our population, that’s why it’s like winning the lottery to get a voucher.


As a landlord I hear what you are saying but I respectfully disagree. I am not taxed on months when the property is vacant because it quite simply is my responsibility. Land-lording is providing a highly un-liquid asset and is subject to market changes based upon supply and demand as opposed to a “cost plus” type of venue. I know of many people that get involved i real estate rentals that, because of market issues, actually suffer a negative cash flow every month. They have a choice of either taking a smaller loss or a bigger loss and they can… Read more »


I had hoped others would have joined in particularly some with Economics background. Unfortunately no one has and I rather than start with the Economic concept that a firm will operate till its marginal revenue equals its marginal cost as it relates to rental property, will instead focus on your point. that ” in the very long run, all forms of income-producing assets equilabrate, adjusted for risk, expenses.” Deferring to John Maynard Keynes, author of “The General Theory of Employment, Interest and Money” and the founder of what we call today’s Keynesian economics, wrote that “In the long run we… Read more »


Interesting points. Here in the DC metro there are relatively fee properties under water or that cannot be reasonably sold. Taxes are definitely recovered quickly via rents. Riverbender points to distressed markets in Illinois, where distressed owners landlord at a loss. The economic assumptions I apply where I live are different than Illinois. The picture I capture is that there are a number of quietly desperate people in Illinois, and this factor cannot be captured by an all purpose misery index, although the numbers will get worse and make these kind of observations manifest.


Yes I fully agree with your welcome addition to this discussion. One might say here in Illinois that we have, as you have pointed out, a considerable amount of what we might call an inelastic supply of rental housing based upon the current distressed property situations. To sell and walk away many property owners would have to come up with the full mortgage balance that the sales price often will not cover. These property owners, then, often become landlords regardless of their intentions not to become one. Add to that the many that have purchased a property or two based… Read more »


Mark. Here in Rockford I pay over 45% of my rental income in property tax’s. That is higher than any federal bracket. Now add in mortgage/ insurance/maintenance/repairs/etc so there is little left over. Very little in appreciation if any. When between tenants almost $600/mt in tax’s alone I can’t keep it empty too long. A few miles away “The Grove” HUD properties have similar values around $150K each for 47 units and tax’s are zero. True renters actually pay the tax’s but only when rented. A few months empty and it’s difficult to catch up without raising the rent and… Read more »


Sounds like you made a bad rental investment. Ditch it before it goes to zero.


investing in Illinois has turned into bad rental investing.

joe blow

I have a hard enough time funding my own retirement, I’m sorry but I couldn’t afford to pay for other people’s retirements too so I moved the hell outta there! Hands down the BEST decision I ever made!

For at least several years, on and off, I follow Wirepoints, as well as work of others concerned with a dare state of Illinois finances. This is not what general public is informed by the mainstream media. Politicians who try to talk about it, as Rauner for example, are ridiculed and voted out of office. I know that there are viable ideas how to fix it. Reading again about how bad it is, without a perspective how to fix it, is a masochistic experience. I suspect that many Wirepoints readers, as myself, are not masochists; they check from time to… Read more »


The state will most definitely, most assuredly, default on its pension obligations. It’s not a matter of “if” but rather “when”. Debts that cannot be repaid will not be repaid. The positive aspect is the default and the eventually bankruptcy or insolvency proceedings We together must convince our people to do this quickly, rather than slowly, and not prolong the pain. My gut feeling is that this will go on for a long, long time, and it will a generation of abandoned public and private buildings and infrastructure – due to inability to pay – before the state finally caves… Read more »

I was already an adult when the first symptoms of the decay of the Polish economy showed up by the end of 1960s. I was on the streets of Gdańsk, my home city, during the bloody riots in December of 1970. I observed the boom on credit in 1970s, and did some political writing trying to prevent the complete economy collapse by the end of 1970s. I lived throughout Solidarity and the Martial Law. I am bringing this personal experience because as you do now, many in Poland then, took an approach: “the worse it is the better it is.”… Read more »


I understand this perspective, and you’re right, getting worse does NOT make it better. However, the problem now is that Illinois’s Default is inevitable, and as we say in English, “It is already baked into the Cake”. Anything other than Default is just delaying the inevitable. The default is ‘good’ – it will clear out the pension debt and free up funds for other resources. The problem is that there is no solution left. We’ve already tried amending the pensions, and it was struck down as unconstitutional; The democrats who run the state REFUSE to allow a referendum on the… Read more »

The Truth Hurts

You think default will “clear out” pension debt? That’s a first. Maybe a reduction. We saw what happened when their wasn’t enough money during the last budget stalemate. Ultimately the comptroller and the courts decided who was paid first. Bondholders and pensioners are first in line. This problem won’t get better by waiting and hoping for a default.

cass andra

Interesting question what happens when the pension fund runs out of money. The municipality has a union contract which probably requires funding the pension. There has been some discussion on this website about moving to a Pay-Go. The governing body or treasurer probably decides what the municipality should or is able to pay. The decision will have to take into account what other bills are due and what costs will have to be cut. It seems to me that retirees can only sue for one payment at a time — that is for one or more missed payments. Perhaps the… Read more »

The Truth Hurts

What’s happening right now in terms of cities that are unable to make their pension contributions? Money that they were supposed to receive in terms of state funding is diverted or “seized” and given to the pension fund. What happens if the pension fund runs dry? Why would anyone in Illinois not think that they would divert funds to pensioners before other payments? They are already doing that now. While I think these pensioners in these cities will be taking a cut I don’t think it’s realistic to think you are going to cut them down to 25 cents on… Read more »

I do not agree that there is no solution left. If I understand reasoning presented by Mark Glennon in his many previous texts, there is a viable path by establishing a cutoff date for the current pension system, and having everybody from that point on 401(k). One can negotiate a reasonable transition protocol. Hence, the objective now should be in reaching all people benefiting from the generous but bankrupt pension system, and explaining to them that reform today can be much more beneficial than the bankruptcy proceeding maybe next year, maybe 10 or 20 years down the road. I brought… Read more »


You’re right, there are lots of solutions left. It’s just that *none* of them are politically viable. *None* of them will ever happen. I only wish it were so easy to fix this problem. But there are too many interested stakeholders that are affected and none of them will ever agree. You saw what happened when the CTU went on strike. Lightfoot nearly completely capitulated and gave them everything they wanted. Imagine the statewide strikes and riots if they actually tried to cut and reduce pensions. And I don’t mean just passing a law and going through the courts but… Read more »


There may never be that moment where everyone wakes up about the same time and says, “I need to leave right now” since everyone seems to have a different breaking point.


“There may never be that moment where everyone wakes up about the same time and says, “I need to leave right now” since everyone seems to have a different breaking point. ”

Depends on far north the tremors from the New Madrid fault earthquake reach, or how long the next drought lasts.


I have been somewhat proactive because I have given my local State Rep a number of possible cost savings ideas for taxpayers. His office is only about 4 miles from my home. Some of the ideas were cutting pension management fees in half a few years back which I believe he brought up but died in some meeting never to see the house floor. About 1 year later Calper’s in Ca did the same and said within 4 years they would cut fees by 50% over 4 years and could save over $500M/yr. Another idea was why is Illinois still… Read more »


how about the folks fleeing to Texas? Am I reading this correctly that in an economic downturn they might be screwed too?


In other words, it’s the good life for Chicago public employees and the opposite for taxpayers.


Don’t forget downstate school administrators. Almost always the highest paid state employees in the counties.