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Cities such as New York and Chicago are in deep financial trouble. Broadly speaking, they have two options: Make the difficult but appropriate choice to raise taxes and reduce the scale of government, or continue to live in a state of denial, increasing their pension obligations while also promising their residents more services.
I am sad but not surprised to report that they are choosing the latter. Even though both cities — as well as New York and Illinois — face major budget shortfalls, high taxes and declining populations, they are doubling down on irresponsibility. Illinois has made Chicago’s pension benefits more generous, and New York is considering its own version of the Illinois bill. Either these governments have become completely detached from reality, or they are counting on a federal bailout.
The numbers are sobering. Chicago faced a $1.2 billion gap in this year’s $16 billion budget, and New York City is staring down a $4.5 billion gap in its $127 billion proposal for next year. And yet last year the Illinois state legislature passed a bill that will increase the pensions of Chicago firefighters and police officers hired since 2011. It’s expected to increase pension costs by $11.1 billon through 2055, and would render the city’s already underfunded pensions insolvent.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.