Despite the City Council’s demonstration of defiance, the new approved budget represents a continuation of the proverbial kicking of the can down the road. Yes, the lightning rod of every budget debate — an increase in property taxes — was soundly rejected, but what has emerged is a budget that does virtually nothing to restrain spending while allowing for an array of regressive taxes and fees to further reinforce Chicago’s reputation as one of the highest-taxed big cities in the country.
While that is bad news for Chicagoans, the good news is the City Council’s willingness to seriously challenge the mayor’s budget. However, the city has a spending problem. With Chicago maxed out on taxes, fees and fines and the aldermen one year closer to running for re-election, they would do well to begin working on the next budget now.
What might that look like?
Begin the process of true zero-based budgeting requiring that all city activities and programs be closely re-evaluated. This should be the standard practice of every city department and mayor-controlled agency such as Chicago Public Schools and the CTA.
The city needs to conduct a full inventory and reduction of expenditures that were added using one-time COVID-19 relief funds and the historic tax-increment financing sweeps that have occurred at the same time.
City Hall also needs to seriously scrutinize non-personnel and contractual spending; non-personnel spending has grown by nearly $3.3 billion since 2019, according to an Illinois Policy Institute analysis.
The city also must revamp its procurement office and process, which oversees contracts. It should adopt a strategy to maximize reimbursements and monetize department services. For example, it’s estimated that the Chicago Fire Department forgoes as much as $400 million in reimbursements each year from the federal and state governments, hospitals and private insurance companies.
Chicago should embrace long-term budget planning. This includes the practice of guaranteeing funding levels over multiple years under strict expenditure caps and affording departments flexibility to spend within those caps and roll over any secured savings.
Additionally, the city must examine subsidies to Chicago Public Schools and at minimum demand reductions equal to the annual tax-increment financing windfall to CPS, which is $159 million in the current budget year.
Critical to balancing next year’s budget and to the city’s long-term financial health is addressing the abysmal performance of CPS, which along with pensions poses the greatest threat to the financial stability of the city. This is not only because schools are consuming an ever larger share of the city’s tax revenues but also because along with crime and taxes, the absence of quality school choices is contributing to population loss and lack of new investment, which affects revenues.
A Wirepoints analysis suggests that only half of CPS’ $10 billion budget finds its way into schools, so there’s an opportunity to balance the district’s budget while weaning schools from the city’s subsidies, which could then be used to meet the city’s own financial needs. The first and most important step would be to tie the new contract to available revenues. The city completed a contract in 2019 that raised Chicago Teachers Union member salaries and added thousands of staff members, so Chicago can justify a pause to allow spending to align with revenue.
This also requires breaking up CPS’ central and regional offices and decentralizing the district so money follows students: Return to pre-COVID-19 non-teaching staffing levels and give principals and elected Local School Councils full autonomy over their school budgets as well as the authority to select better school models. Near-empty schools should be consolidated and repurposed. Charters and magnet schools should be expanded to attract more students.
The city also must make securing state pension funding equity for Chicago teachers its top state legislative priority. This would allow the city to shift almost $600 million in annual funding to the city pensions and save schools. Equity in teacher pension funding for Chicago teachers is long overdue, as the state covers 98% of the total employee contributions for downstate teachers but only 32% for Chicago.
The City Council needs a truly independent and well-resourced budget office with access to all city information, full auditing powers and the staff to be an effective, independent, neutral arbiter of fact and fiction in Chicago’s long-running budget shell game. It should also be authorized to evaluate the city’s controlled agencies. Currently, the council’s Office of Financial Analysis has two people.
The city also needs a truth-in-budgeting ordinance. Such an ordinance would require methodology and data for city budget projections to be publicly disclosed. It would set a mandatory legislative budget process and schedule. This is what the law provides for at the federal level, with the powerful Congressional Budget Office independently evaluating and scoring all legislative proposals.
Having asserted itself, the City Council needs to provide itself the tools that address the city’s crisis.
Paul Vallas is an adviser for the Illinois Policy Institute. He ran for Chicago mayor in 2023 and 2019 and was previously budget director for the city and CEO of Chicago Public Schools.
Submit a letter, of no more than 400 words, to the editor here or email letters@chicagotribune.com.