The Illinois pension crisis means that residents must pay high property levies while getting little in return.

Hilary Gowins
April 7, 2022
Economy, finance, and budgets

Patricia Hill, who grew up in Chicago’s Hyde Park neighborhood, achieved her dream of homeownership in 2003, when her family moved to the quiet Chicago suburb of Matteson. She raised two daughters in a two-story home she bought for $315,000. But by 2013, her annual property tax bill was $11,500, nearly driving her into foreclosure. By 2020, Hill had seen her annual payments lowered to $8,900 with a senior exemption, but the burden remains significant. “Everyone is in shock when I tell them the property taxes. They say it must be an error,” Hill says. It’s no error—just a byproduct of the state’s ongoing pension crisis.

Taxes have outpaced earnings for many homeowners here. While property taxes in Cook County jumped 99 percent between 2000 and 2019, wages in Cook County rose 57 percent during that period. Hill saw an increase in her home value during Covid, but housing prices in Illinois grew 11.4 percent in 2021 compared with an 18.4 percent average in other states. And throughout the pandemic, tax collections continued to rise: Cook County billed an extra $534 million in property taxes in 2021 despite federal relief.

The increased tax burden yields underfunded pensions, not better government service. Illinois’ pension crisis both occupies a growing share of state and local budgets and represents a $75 billion debt hole for local governments—which officials often fill with property tax increases. Each Matteson household owes nearly $16,000 in local pension debt, a tab that jumps to over $45,000 per household with state pension debt. These costs mean less money for roads and schools while driving residents to leave the state. Last year, Illinois recorded its eighth consecutive year of population decline, losing a record 113,776 residentsfrom July 2020 to July 2021, according to Census Bureau estimates.

For a closer look at the relationship between public pensions and property-tax growth, consider Chicago. In 2022, Chicago’s pension costs make up more than $2.3 billion of the city’s budget, or 21.4 percent of the city’s own source revenue. That’s more than the city’s entire property-tax levy of $1.7 billion this year. Yet residents get little for their money. Chicago recently ranked 141 out of 150 citiesfor municipal service quality. That’s no surprise: over the past decade, pension spending in Chicago increased 239 percent, while spending for city services increased only18 percent.

Public pension reform received bipartisan support in the Illinois general assembly as recently as 2013, but because of a ruling by the state supreme court, the only way to achieve meaningful pension reform for state and local governments is through a constitutional amendment. Reforms could save roughly $2.4 billion in the first year and more than $50 billion through 2045, while eliminating the state’s pension debt (rather than the 90 percent reduction state leaders aim for). Indeed, a “hold harmless” plan would preserve every dollar of pension benefits promised to public workers for work already performed. Similar reforms to local pension systems could offer significant property tax relief to overburdened homeowners and free up resources for spending on current services.

Hill is not giving up and doesn’t plan to move. But she has spent many sleepless nights worrying over her massive property tax bill. “This is supposed to be the American Dream for me and my family,” she said. “I’m holding on to everything I can, but I’m losing because of this house.” She and other state residents shouldn’t have to pay for their government’s irresponsibility.