Residents Abandoning Chicago: Is It Following in Detroit's Footsteps?

Illinois' sources of revenues are leaving as government employees keep demanding more, more, more.


Credit: Hammerin Man / photo on flickr

The latest U.S. Census Bureau data has the American population growing at a little less than one percent for 2015. Bloomberg has a map here illustrating the data. A little less than half the growth is from immigration to the United States.

The growth isn't evenly distributed, and a couple of states stand out like big, red sore thumbs. Illinois and West Virginia both saw population declines (along with a few other states to a much smaller degree) for the 12 months measured.

The biggest loser in the latest demographic analysis is the city of Chicago. Of all the metropolitan areas that lost population in the last year, it lost the most—more than the greater Los Angeles area, more than Boston, more than Minneapolis.

For context's sake, though, the whole region lost only 12,626 out of a population of millions. The City of Chicago itself lost 6,263 residents. Nevertheless, the Chicago Tribune notes that this is the first decline in population for the city since 1990. And the reasons why are fairly predictable for those who are paying attention:

By almost every metric, Illinois' population is sharply declining, largely because residents are fleeing the state. The Tribune surveyed dozens of former residents who've left within the last five years, and each offered their own list of reasons for doing so. Common reasons include high taxes, the state budget stalemate, crime, the unemployment rate and the weather.

Richard Morton, whose family grew up and lived in Illinois, is retiring down to Florida at the age of 62. Yes, the weather obviously plays a role, but there's more:

"I used to enjoy Illinois and the area," he said. "But everyday there's a reason to not want to stay here. Between (Gov. Bruce) Rauner and (House Speaker Michael) Madigan, how will the state ever fix its pension problem? To me it seems unfixable, and I don't want to have to pay for it."

He may not be wrong. Yesterday the Illinois Supreme Court struck down an effort to contain pension costs of Chicago government employees by cutting benefits and requiring employees to contribute more. The state's constitution flat out forbids any policy changes that could result in public employee pensions and benefits being "diminished or impaired" in any way. The only solution that seems to be acceptable to certain union groups (not all of them opposed Chicago's compromise) is to feed the beast more money, which is a bit of a problem when your sources of revenue are voting with their feet. One expert calculated in the Tribune that the population drop across the state of Illinois could cost about $8 billion a year in revenue to municipalities.

The other possibility is bankruptcy. We know from the experience with Detroit's bankruptcy that federal bankruptcy courts can overrule state-level protections of pension benefits. That may be the direction Chicago heads.

And wouldn't you know it, we predicted all of this coming down the track back in 2013. In our October issue that year, we looked at five struggling municipalities in a feature titled "How to Break an American City." Chicago looked like an outlier at the time, when compared to Detroit and San Bernardino, California. But it was already losing population back then, and Steven Greenhut noted, "Chicago has high taxes and punitive regulations, large and bureaucratic government, and surly public-sector unions. But the depth of the city's problems is mind-boggling, and the results of a fiscal disaster there will be far more spectacular than bankruptcy in more obviously decrepit cities."

Read more of Greenhut's analysis here. And note that the Chicago Teachers Union has responded to this financial crisis by voting for a one-day strike to demand more money for themselves.