Chicago’s budget deficit could skyrocket to $1.9 billion by 2026 if the economy plunges — and even in the most optimistic scenario, the gap between revenues and spending would then be 789 millions of dollars.
Mayor Brandon Johnson’s three-year budget forecast is a far cry from the sunny picture painted by his predecessor, Lori Lightfoot, when she left office.
As the Sun-Times reported Tuesday, the $85 million 2024 budget deficit that Lightfoot projected in mid-April has ballooned to $538 million.
As the newspaper also reported, contributing factors include:
• $200 million tied to Chicago’s burgeoning migrant crisis.
• $90 million triggered by Johnson’s decision to get rid of Lightfoot’s automatic escalator that would have blocked annual property tax increases at the rate of inflation.
• $152 million in federal stimulus funds that cannot be used to “replace revenue” because Chicago has “already recovered revenue” through a recovering economy.
• A $251 million shortfall related to personnel costs, including previously negotiated raises for police officers and firefighters as well as new five-year contracts that call for 7,000 city workers to continue receiving salaries in force paid to their counterparts in the private sector.
There is also an additional $45 million in pension costs, due to Johnson’s decision not to let Chicago Public Schools cover the annual contribution of nonteaching employees who receive retirement checks from the employee pension fund municipal.
Stacy Davis Gates, president of the Chicago Teachers Union, was happy with the choice of Johnson, a former paid CTU organizer.
“Previous mayors shifted these costs to CPS without planning to pay them, sabotaging the district,” Davis Gates said.
Johnson, she added, is “doing what is responsible, legally required and accountable to our schools, our students and the educators who have spent their lives serving CPS.” »
The revised forecast and accompanying press release note that “the increase in benchmark interest rates by the Federal Reserve to combat inflation” has impacted the local economy and “adversely impacted income”.
“The projected budget gap paints a realistic picture of our city’s financial situation, which will require careful review and strategic action,” the mayor said in the press release.
“In the coming weeks, we will take a much closer look at the challenges we face and how we will address these challenges in a reasonable and responsible manner and not on the backs of workers and working families,” while supporting “my priorities in the areas of public health”. safety, environment, youth and mental health.
The press release did not mention Johnson’s plan to ask the City Council to repeal the automatic escalator. It simply highlights Johnson’s focus on “minimizing the impact on vital public services and ensuring that the burden of reducing the budget deficit is borne as fairly as possible”.
The new mayor’s “multi-pronged approach” to closing the gap calls for “a spending review, revenue improvement measures and possible reallocation of resources,” according to the press release.
Just last week, Johnson refused to rule out budget cuts or tax increases to fund the seemingly endless parade of asylum seekers and “winterized base camps”. He proposed deporting more than 2,000 migrants now sleeping on Chicago police grounds. train stations, as well as O’Hare and Midway airports. Each tent city capable of housing up to 1,000 migrants would cost the city $5 million per month.
The mayor would only say that “sacrifices” would be required of Chicago taxpayers.
“Chicago is a resilient city with a rich history of meeting challenges head on. We will emerge from this period stronger and more united, continuing our path toward investing in people and a better, stronger, safer Chicago,” the mayor was quoted as saying Wednesday.
Zoning Board Chairman Carlos Ramirez-Rosa (35th), Johnson’s leader, said he was pleased the mayor was “keeping his campaign promise and staying the course on property taxes.”
“Chicagoans have really struggled to keep up with rising property taxes over the past several years, and property tax increases under former Mayors Rahm Emanuel and Lori Lightfoot have not helped Chicago’s working class,” he said. added Ramirez-Rosa.
“I’m glad this mayor is working to raise revenues equitably and ensure those with more means pay more. … I hope we can explore options in Springfield around taxing services that wealthier Chicagoans are more likely to use. But the administration will likely turn to the (tax increment financing) surplus to fill that gap as we look for longer-term solutions.
The decision to absorb $45 million in CPS pension costs is not a surprise, the floor leader said.
“Our schools are in dire need of funding. We have seen the impact of budget cuts on CPS. This mayor has made it clear that…our children and our public schools (are) a priority for him. He’s a former professor. He knows the challenges our schools face. Any help the city… can provide to our schools is welcome,” Ramirez-Rosa said.
Budget Committee Chairman Jason Ervin (28th) was asked whether the council that Lightfoot pushed to approve annual property tax increases would repeal automatic escalation.
” Honestly, I do not know. There is value both ways. We have not had this conversation as a Council. It seems like, based on the mayor’s predictions, it’s not something he plans to (continue). But at the end of this conversation, we must pass a balanced budget. How we will get there, we don’t know yet,” Ervin said.
“No one wants to raise taxes at a time when we are facing inflation and other (challenges). Last night I had a meeting with residents in my community who are seeing a double-digit increase in their tax bills. These are tough times for individuals on the income side. We have a lot of vacancies. We may need to reimagine how we do certain things.
Ervin said he would begin this delicate balancing act by surveying his members — first about their spending priorities, then about suggested budget savings and revenue ideas.
The pace of new arrivals will be on top of those deliberations, and it’s expected to pick up until next summer, when Chicago hosts the Democratic National Convention, he said.
“There is always an end. We just don’t know when. …It’s a financial challenge. It’s an emotional challenge. This is something we, as a city, have never experienced before. If this becomes the norm, we need to find a way to solve this problem. And right now, we don’t have all the partners that we think should be at the table financially. And unfortunately, we have to deal with that because it’s something right around the corner,” Ervin said.
“Over time, through conversations with the state and federal government, we will get to a point where we can manage this without it being such a heavy financial burden on the citizens of Chicago.”
Wall Street rating agencies had reacted favorably to annual property tax increases as well as Lightfoot’s decision to prepay $242 million in future pension debt to avoid saddling Chicago taxpayers with interest. compounds.
They rewarded the city with a series of bond rating increases and praised its decision to earmark what it claimed was a $554 million surplus at the end of 2022 and $142 million more this year to a “Pension Advance Fund” which would help pay pension advances. pension payments” until 2026 “above the legal requirement to stabilize the capitalization ratios of the four pension funds”.
“This one-time money will help build a bridge to the expected structural revenues” of a Chicago casino. According to Lightfoot’s mid-April forecast, this casino is expected to generate $245.8 million by 2028.
On his last day in office, Lightfoot signed 10 executive orders. The largest of these executive orders established the Pension Advance Fund, using $641.5 million in surplus funds.
Johnson projects a modest surplus of $61.7 million for 2023. He has other priorities for those excess funds, having promised to make $1 billion worth of “investments in people” through a series of social programs which constitute the cornerstone of its anti-violence strategy.
Shortly after taking office, Johnson signed an executive order outlining the new budget process. The penultimate line stated: “This decree shall supersede any inconsistent provision of any previous decree.” »
Johnson’s budget forecast nonetheless calls for “$2.7 billion in pension contributions across all funds” in 2024. Of that, $306.6 million will be prepayments.
Budget Director Annette Guzman could not be reached for comment.