CHICAGO — Local governments in Cook County, Ill. face a combined financial burden of nearly $34 billion, including unfunded pension liabilities and municipal bond debt, a pair of public policy groups here in Chicago said Tuesday.
Institute for Truth in Accounting and the Heartland Institute unveiled a summary of an upcoming report on the county’s debt Tuesday morning to the county’s pension subcommittee. The full report, due out in early January, gives a detailed overview of the debt load carried by 518 tax districts in the county.
“We’re going to hit a point, probably not in the next 20 years but in the next five to 10 years, unless there’s some huge economic reversal, where payments on debt, and pensions especially, are going to crowd out other spending,” said John Nothdurft, director of government relations for the Heartland Institute, a free-market think tank, in an interview with the Bond Buyer.
The second-largest county in the U.S., Cook has roughly 550 taxing units, including Chicago.
The debt load translates into a burden of $17,147 for the average county household, according to the report.
“This is really a problem of overspending,” Nothdurft said. “You’re not going to be able to tax your way out of this problem.”
The groups audited the books of the county’s 518 districts. The unfunded pension liability totaled $31.07 billion and the unfunded retiree health care benefits liability totaled $7.18 billion. Other debts — which include bonds — and liabilities totaled $24.88 billion, the report said.
The local governments together had a total debt of $63.13 billion. The report found total assets of $29.41 billion, leaving a financial burden of $33.72 billion.
“These numbers are startling, and much higher than has been reported in the popular press, higher than believed by elected officials, and likely to be far higher than most residents of Cook County imagine,” the report said.
Local governments struggling with too much debt could suffer credit downgrades which lead to higher borrowing costs, the report said. Property tax rates could rise and public safety and quality of life could decline as debt obligations take a bigger bite of general funds, the groups said.
The burden could ultimately mean bankruptcy or state takeover for the most challenged communities, as the state of Illinois is too heavily in debt to be of much help to local governments unable to meet their obligations, the report warns.
“State governments, like Illinois, are too heavily in debt to bail out local governments, like the taxing districts within Cook County,” the report said. “There is no procedure for states to declare bankruptcy, thereby allowing the national government to oversee their workout. Consequently, there is no path around a political crisis as well as a financial crisis.”