Mayor Brandon Johnson can’t afford to bask in the glow of last week’s Democratic National Convention. The cold hard reality of Chicago finances is about the slap him in the face.
The three-year financial forecast that serves as the city’s preliminary budget is due out this week, and the results will not be pretty.
The “base outlook” in last year’s version projected a $986 million shortfall in 2025. The “negative” outlook included a $1.53 billion deficit. Even the rosiest economic outlook projected a $636 million shortfall.
A lot has happened since then, placing an even heavier burden on beleaguered Chicago taxpayers.
Gov. J.B. Pritzker convinced the General Assembly to eliminate the state’s 1% grocery tax, though individual municipalities have the power to restore it in their area. That alone will add up to $80 million to the city’s shortfall.
Chicago firefighters and paramedics have waited more than three years for a new contract. When settled, it will require the city to shell out three years of retroactive raises, to say nothing of firefighters' demand for 20 more ambulances — and the paramedics to staff them.
Johnson extended the police contract and doubled the pay raises negotiated by former Mayor Lori Lightfoot, but now must cover those costs.
The mayor’s hand-picked school board approved a Chicago Public Schools budget that doesn't include a $175 million payment for pensions for non-teaching staff. The city once absorbed that cost, but wants CPS to pay it.
The $1.15 billion deal privatizing Chicago parking meters could saddle taxpayers with a $120.7 million liability under an arbitrator's recent ruling. During the pandemic, Lightfoot had authorized briefly reclaiming some spots for the city, but the arbitrator ruled what it called the city's "scheme" to be out of bounds.
Revenues from Chicago’s temporary casino at Medinah Temple are still falling short of the amount Johnson anticipated.
And Johnson has promised to continue “advance” pension payments above and beyond the statutorily required contribution. That will cost Chicago taxpayers an additional $271 million next year — on top of the $2.7 billion pension payment this year.
Last year, Johnson re-wrote the political script. Chicago mayors usually lower the boom on taxpayers in the first budget after an election, giving taxpayers three years to forget before going to the polls again.
Instead, Johnson froze property taxes, rejected an automatic escalator tying property tax increases to the inflation rate and relied on one-time revenues, including $434 million in surplus tax increment financing funds.
Johnson’s $16.77 billion budget included none of the $800 million in tax increases he proposed during his campaign, partly because he was counting on Chicagoans to approve a binding referendum authorizing the City Council to raise the transfer tax on high-end real estate transactions. Instead, voters rejected that referendum, nicknamed "Bring Chicago Home."
The broader question of generating new revenue was punted to a Council subcommittee chaired by freshman Ald. William Hall (6th). Hall could not be reached for comment for this story, and Budget Director Annette Guzman did not return calls.
Budget Committee Chair Jason Ervin (28th) said he expects the revenue search to begin with the perennial idea of taxing professional services — but such a tax requires General Assembly approval.
“We need to definitely work with the state on how we’re dealing with sales taxes on services. That’s number one. The way that we do sales taxes has the most impact on communities that necessarily have to go buy goods. The state has to look at how we tax goods and services and, hopefully, come up with a more equitable formula,” Ervin said.
Legalizing video gaming in Chicago is another item that must be considered, the chairman said.
“I’m a little hesitant on that because we still haven’t gotten the [permanent] casino up," Ervin said, and there is concern about competing with that.
"There have been conversations that say, 'Hey, the guy that goes to the bar and does video poker isn’t the same guy that goes down to Medinah” Temple, Ervin said, referring to where Bally's operates a temporary casino while building its new facility.
“I know that some members of the Council agree with doing that. I’m not 100% sold that that’s what we need to do. But I do think it is worthy of a conversation to look at the projections to see what it looks like.”
Ald. David Moore (17th) has urged Johnson to restore the automatic property tax escalator, impose the grocery tax and lift Chicago’s long-standing ban on video gaming.
Ervin said nothing should be automatic when it comes to raising property taxes.
“If it is not needed, then we should not do it," he said. "It’s something we should evaluate on an annual basis. If that evaluation says we need to do it, then we can. But I don’t think we should automatically do anything when it comes to raising revenue without having an honest conversation and looking at the expense side of the ledger."
