Mayor Brandon Johnson is pushing back the start of the annual city budget process, leaving himself and aldermen in a tight spot: They need to quickly overcome the acrimony among elected officials at City Hall to find a way to close a daunting 2025 deficit that has been barreling down on Chicago for years.
The nearly $1 billion budget gap that must be balanced before January was no surprise, with Johnson’s team outlining a nearly identical figure last fall. But the mayor’s announcement last week that he will start the process later than usual and pass the plan in December means the City Council is set to take its latest budget vote since 2009, with little time to spare and many disagreements to mend as the mayor tries to get 26 aldermen to agree with him.
Though Johnson has downplayed the extra two weeks he’s taking to unveil his budget proposal, the domino effect of department hearings now concluding the week before Thanksgiving has aggravated aldermen across the political spectrum who worry they’ll have less time to propose their own amendments and confer with constituents and experts.
That’s a potential predicament for a mayor presiding over an increasingly rebellious council, with 33 members bucking him last month on a ShotSpotter vote and a recent shake-up in his intergovernmental affairs office hobbling aldermanic relations further. If Johnson struggles to get a majority of the council to back his spending package for 2025, recalcitrant aldermen would be empowered to make December demands in exchange for their votes.
Still, the mayor remained sanguine when asked by reporters Wednesday about the new timeline, saying “that’s not a delay” because it’s still before the statutory deadline of Dec. 31.
“It’s unfortunate that, again, because of the failures of decades ago that now we have the responsibility to fix what’s broken,” Johnson said. “We’re looking at everything, and we will put forth a proposal that not only closes this budget deficit but sets us up for the future.”
It’s true the Johnson administration is not responsible for the city’s age-old structural deficit, but it remains unclear what approach the progressive first-term mayor will take to shore up finances while still appeasing his leftist, labor-friendly base.
Options include raising property taxes, which Johnson said in his mayoral campaign that he would not do; finding revenue through other levies, fines or fees; cutting city services or personnel, including via layoffs and furloughs; slashing migrant funding; and using budgetary maneuvers such as refinancing debt, costly borrowing or sweeping the city’s tax increment financing surplus.
This situation is also playing out amid a full-blown struggle between City Hall and Chicago Public Schools leadership that partly hinges on a pension payment for nonteacher CPS employees that Johnson hopes to punt from the city budget back to the school district. The sparring highlights the historically fraught financial entanglements between the two entities, one made more complicated by the mayor’s close alliance with the Chicago Teachers Union.
“It is, by my lens and by the lens of most experienced hands going back a couple generations now, possibly the most challenging moment for the city,” said Joe Ferguson, president of the fiscal watchdog Civic Federation. “Not to downplay the challenge of the Great Recession, but we have fewer options now than we had then. And this is an enormous deficit, a deficit that is in the range of the COVID deficits, without the benefit of any white knights.”
Historic delay
The mayor’s budget speech is now scheduled for Oct. 30, with department budget hearings to follow from Nov. 6 to 20 before the City Council vote in early December. Announcing the revised timeline Monday, Johnson’s office said it “will allow for a more comprehensive and inclusive budget process, ensuring informed and transparent fiscal decisions that reflect the needs of Chicago residents.”
The last time Chicago passed a spending plan in the year’s final month was in 2009, when Mayor Richard M. Daley held the vote for the 2010 budget on Dec. 2.
“I have not spoken with a single person on City Council who thinks delaying the budget address, the budget hearings and the budget vote is a good thing,” said progressive Ald. Matt Martin, 47th, a member of Johnson’s council leadership team. “It just leaves me very curious and frustrated why we very possibly will be spending less time and not more time reviewing the proposed budget and passing something with such significant challenges lying ahead.”
Martin said he’s told the Johnson administration the move was a “mistake” but has not received a response.
But close mayoral ally Ald. William Hall, 6th, argued the fickle nature of some revenues made it hard for the reality of next year’s gap to be evident until now.
“You know, sometimes we underestimate the fact that ‘summertime Chi,’ as great as it is, we have to count all of the dollars, coins and the nickels,” Hall said. “Rather than making a rush judgment, rather than putting out a piece of paper that we have to take back or walk back, I like the mayor’s approach. Slow and steady wins the race.”
Signs were long ago pointing to the $982.4 million shortfall projected for 2025, however.
During Johnson’s first budget season last fall, as he worked to close a $538 million gap and ink a $16.77 billion spending plan for 2024 that passed on Nov. 15, his team estimated a looming 2025 deficit of $986 million.
“Every mayoral administration has its fingerprints on this, including the current administration, but this is absolutely a reflection of the underlying structural deficit in Chicago’s budgets,” said Justin Marlowe, director of the Center for Municipal Finance at the University of Chicago. He pointed specifically to “past decisions about pension policy, infrastructure finance, a lot of short-term borrowing.”
Marlowe added that, without addressing the fallout from these underlying issues, “we’re destined to repeat this whole cycle all over again, next year and the year after and the year after.”
CPS entanglements, property taxes and more
Indeed, Chicago’s pension debt climbed to just over $37 billion last year, and its four funds are far below adequate funding.
The largest pension fund, known as the Municipal Employees’ Annuity and Benefit Fund, is now at the heart of a dramatic standoff between Johnson and CPS CEO Pedro Martinez, whose days on the job appear numbered as the mayor’s team orchestrates his ouster.
The $175 million chunk of the MEABF obligation reserved for nonteacher CPS personnel used to be the city’s responsibility until Johnson’s predecessor, Mayor Lori Lightfoot, began shifting the burden onto the school district. Johnson initially opposed that move but now is fighting to preserve it, in order to shrink the city’s budget gaps for both the rest of this year and 2025.
Whatever happens with the future of the payment, fiscal watchdogs worry about the damaging appearance to investors that Chicago’s waffling on its pension obligations.
“That is the biggest potato in a juggling of hot potatoes,” Ferguson said. “There are a number of legal and financial entanglements between the city and CPS. I don’t know how this one works out … but the way that it is being played thus far does not give much confidence that the right people are having the right conversation.”
Mayoral critic Ald. Scott Waguespack, 32nd, went further. “This one seems more like his financial entanglement with the CTU,” he said. “And he has to realize he has to work as a mayor who represents everybody in the city, and he is no longer the lobbyist for the teachers union.”
Johnson passed his first budget while holding true to his 2023 campaign promise not to increase property taxes, a red line he drew as he sought to stand out with a progressive platform.
Now, the mayor admits that he is considering raising the property tax levy, among a host of other solutions, to plug in the 2025 budget gap: “Everything’s on the table now.”
Always a politically charged move, proposing an increase may turn off aldermen and constituents who already feel beleaguered by taxes and inflation. The Cook County assessor’s office’s triennial reassessment of Chicago properties is also underway this year. Given high vacancy rates and downtown foreclosures, fears abound that low commercial real estate values will shift more of the tax burden onto homeowners.
If Johnson does turn to property taxes, he will do so just a year after he acted to suspend a Lightfoot-era provision to automatically increase the levy by the rate of inflation, capped at 5%. The former mayor’s move had been met with grumbles, but in retrospect some fiscal experts say Lightfoot left a gift for Johnson by taking the tax hike decision out of the hands of the mayor and aldermen.
“The real value of the CPI (consumer price index) escalator that the Lightfoot administration put in was it makes the potential for property tax increases very clear and transparent,” Marlowe said. “You don’t know if an elected official is going to hold steady on their promise that they’re not going to increase property taxes.”
Keeping the CPI provision would not have solved the current budget crisis, as it would have only netted $87 million. Johnson still can opt to take up the escalator for next year, but any meaningful damage to the financial shortfall via property tax hikes will require exceeding current inflation rates.
Of course, property taxes are not the only and certainly not the first tool at the city’s disposal.
There is the hope that in an improving economy, revenues will overperform the most recent forecast and plug in some of the gap. The city can ask departments to make cuts. Even just holding the line on spending would de facto trim some of the fat if revenues increase.
The $150 million allocation toward migrants will also be a natural target for some looking for efficiencies, though it may prove imprudent should there be another influx of buses from Texas.
Pulling money from the TIF districts — where property taxes accrue to fund projects inside the boundaries or nearby — is a tactic previous mayors have used, though it’s seen as a one-time fix. For the 2024 budget, Johnson took a record $433.8 million from TIF funds, $39 million more than last year.
Concern rippled through some members of City Council last week when the Finance Committee moved forward with a plan to refinance up to $1.5 billion in debt. It passed with four “no” votes, and Chief Financial Officer Jill Jaworski estimating the transaction could generate $90 million in savings that would be counted for this budget year and $35 million for next year, while reducing the city’s overall debt load.
Progressive, pro-labor agenda
Johnson’s bold $800 million new revenue package from his mayoral campaign — which included a revived corporate head tax, a charge on securities trades and a higher hotel tax — remains unrealized, facing unyielding headwinds from Springfield. Voters in March rejected his signature Bring Chicago Home proposal, which would have increased transfer taxes on more expensive property sales to raise additional funds for homeless services.
Meanwhile, Hall, the mayor’s handpicked chair of the subcommittee on revenue, said he’s forging ahead this month with convening aldermen to explore other ideas, including digital ads on the Riverwalk or Magnificent Mile, hopefully in time to shore up the 2025 budget: “We can literally have a mini-Times Square for Christ’s sakes, right there on Chicago and Michigan Avenue. I look at the Water Tower as a quintessential example.”
Meanwhile, the labor piece of city budgeting also is proving a challenge despite Johnson’s union organizer roots in CTU. Early on last fall, the administration approved 5% annual raises for the Chicago Fraternal Order of Police, pay raises some observers posited set a high floor for other labor groups in line for deals.
The Chicago Fire Fighters Union Local 2’s expired contract is next. Once that’s approved, the city will owe its firefighters back pay from 2021 onward, not to mention raises until the end of the new agreement.
It is unclear whether the city will bake the impact of Local 2’s retroactive pay into the 2025 spending plan.
The Progressive Caucus of the City Council, meanwhile, has not forgotten its demands, though they are more muted this cycle. Aldermanic sources said caucus leaders met with the mayor’s team last month to stress the need to increase affordable housing investment, pilot a “child care for all” program and prioritize violence prevention outreach.
“I hope we can really come together on a strategy on how we’re going to be able to continue to make the investments that I think Chicagoans really want us to make,” the Progressive Caucus chair, Ald. Maria Hadden, 49th, told the Tribune, while declining to comment on specific negotiations with the mayor’s team. “The ‘what’ I don’t think is really in question, but it still comes down to: How do we fund a thriving Chicago?”
This year, Johnson reopened two shuttered mental health clinics, made permanent an alternate response team for 911 calls and brought back a scaled-down version of the Department of Environment. He cautioned when unveiling these modest wins in his progressive agenda that lasting change “will take time.”
But another wild card could be on the horizon. Progressive Caucus sources said the body also presented warnings about the lack of an immediate plan once the city’s ShotSpotter devices, switched off last month at Johnson’s behest, are dismantled in November.
The progressives, who mostly opposed the gunshot detection technology, were concerned that the 33 council members who support keeping the contract could threaten the ongoing budget process by demanding Chicago activate ShotSpotter or something like it in exchange for their votes. Multiple aldermen at the meeting said they left unsure of the Johnson administration’s preparedness to face such a scenario.
Meanwhile, the mayor last week blamed the city’s fiscal situation on decisions by his predecessors, namely underfunding pensions and selling off city assets like the parking meters and Chicago Skyway tolls.
“Imagine if your ancestors left you a home, and then you begin to spend all of the wealth that they built, and then when you run out of money, you start to sell the paintings and everything else in the house,” Johnson told reporters. “That’s what leadership in Chicago did. … So here’s what we have to do. Everything is on the table, right? I have to deal with this deficit, while also investing in people.”
The Tribune’s A.D. Quig contributed.
