"As America's recession spooled out, Chicago responded to the ensuing budget crunch the way many cities have: by cutting jobs. Between 2003 and 2012, the city eliminated more than 8,000 full-time positions, almost 20 percent of its work force. Yet as the work force shrank, personnel costs increased.
According to an August report by the Illinois Policy Institute, a free market think tank, health care costs jumped by 29 percent in fiscal year 2012. Between 2003 and 2011, the city's average annual cost per employee rose from $58,299 to $96,082. The upshot: Chicago is paying around $700 million more annually for 20 percent fewer employees.
The city has blamed the uncontrollable growth on wage and benefit increases required by collective bargaining agreements with labor unions, which represent 89 percent of city employees. The city's budget gap now stands at $369 million, and according to the report. Chicago must find a way to increase its pension contributions from $476 million to $1.2 billion a year by 2015.
From Reason magazine, December, 2012.