Introduction to Chicago’s Budget Crisis
Chicago will end the year in the red for the second straight year after Mayor Brandon Johnson suffered a devastating blow from the city’s school board, which this week balked at authorizing a short-term, high-interest loan to reimburse the city for a $175 million pension payment for non-teaching school employees.
The Defiance of the Chicago School Board
The continued defiance by a partially elected Chicago Board of Education still controlled by Johnson’s own appointees will force the city to end 2025 with a $146 million shortfall and make what the mayor called the “hard choices” needed to erase a nearly $1.2 billion budget gap in 2026. “They passed a budget that didn’t have cuts to the classroom — or as far as what we can tell. That’s the most important thing here,” Johnson said during a virtual budget briefing Friday.
Impact on the City’s Budget
Chicago Public Schools needs a record $379 million tax-increment financing surplus just to keep cuts out of the classroom — even without making the pension payment. That’s $79 million more than last year’s record amount. But CPS is not going to get it. Although the precise number will not be known until the city’s capital plan is finalized, Budget Director Annette Guzman said the 2026 TIF surplus is “anticipated to go down” to reduce city borrowing costs for infrastructure projects.
Consequences of the School Board’s Decision
Ald. Jason Ervin (28th), chair of the City Council’s Budget Committee, also advised CPS not to hold its breath for a record windfall from City Hall. “If the surplus doesn’t reach that $700 some-odd million level to support $379 million going to CPS, then CPS may have to make some difficult decisions,” Ervin said. “When you surplus TIF dollars, you are essentially delaying or not doing things that you said you were going to do” in “areas that have economic needs.”
The Budget Hole Deepens
The budget the school board passed does commit CPS to making the pension payment, provided it receives additional funding from the city or state. Still, the board’s 12-to-8 vote embarrassed Johnson — and it increased his 2026 budget hole to $1.2 billion. That includes $200 million for four years’ worth of retroactive pay for 4,800 firefighters and paramedics now poised to ratify a new six-year contract that included no major union concessions.
Seeking Progressive Revenue
Reiterating his oft-repeated call for “progressive revenue,” Johnson said the “ultra-rich and our large corporations have to do more.” If the Illinois General Assembly refuses to support progressive revenue sources to help Chicago dig out of its massive budget hole, Johnson confirmed what senior mayoral adviser Jason Lee told the Sun-Times nearly a month ago — the mayor will seek a dramatic expansion of the city’s home-rule authority to allow the city to help itself.
Potential Revenue Sources
That might allow Chicago to tax professional services, high-end property transactions or impose a corporate income tax. “There are progressive means in which we can generate revenue that we don’t have the ability to do because of the way the law is structured,” Johnson said. “If the state of Illinois is not necessarily interested in some of those ideas at the state level, we’re certainly ready and prepared to explore them at the city level.”
Other Revenue Options
Two of the most likely possibilities currently within the city’s control are an increase in the $9.50-a-month garbage collection fee that has been frozen since its 2015 inception, and restoring the automatic escalator imposed by former Mayor Lori Lightfoot that would lock in annual property tax increases at the rate of inflation. The City Council is also facing an Oct. 1 deadline to reinstate the 1% grocery tax eliminated by the state or risk taking an $80 million hit.
Conclusion
The city’s budget crisis is deepening, and Mayor Johnson is facing a significant challenge in finding a solution. The defiance of the Chicago school board has increased the budget hole to $1.2 billion, and the city is exploring various revenue options to address the shortfall. The outcome of this crisis will have a significant impact on the city’s future, and it remains to be seen how Mayor Johnson and the City Council will navigate this challenging situation.
FAQs
Q: What is the current budget shortfall facing the city of Chicago?
A: The city is facing a $146 million shortfall in 2025 and a nearly $1.2 billion budget gap in 2026.
Q: What is the main cause of the budget shortfall?
A: The main cause of the budget shortfall is the defiance of the Chicago school board, which refused to authorize a short-term, high-interest loan to reimburse the city for a $175 million pension payment.
Q: What revenue options is the city exploring to address the budget shortfall?
A: The city is exploring various revenue options, including increasing the garbage collection fee, restoring the automatic escalator on property taxes, and seeking a dramatic expansion of the city’s home-rule authority to allow the city to tax professional services, high-end property transactions, or impose a corporate income tax.
Q: What is the potential impact of the budget crisis on the city’s future?
A: The budget crisis has the potential to significantly impact the city’s future, including cuts to essential services and increased taxes for residents.
