By: Ted Dabrowski and John Klingner
Over the last four years, first Mayor Lori Lightfoot and now Mayor Brandon Johnson have committed the city’s nearly $2 billion in covid-era windfall tax revenues to new programs, new hires, bigger salaries and even illegal immigrants, spending that’s now baked into the budget and difficult to unwind.
But with federal covid revenues running dry, overall revenues projected to drop and expenses growing fast, the mayors’ commitments have left the city’s operating budget with a $1 billion deficit for 2025 and even bigger deficits going forward. Without major spending reforms by Johnson, he’ll likely have to break his promise to Chicagoans to not raise property taxes.
For Johnson, a tax hike on property taxes is the easiest and most effective way to raise more revenue, especially considering his other tax-hike proposals have failed and he has no real chance at getting others of any consequence off the ground. But the pushback will be immense. The city’s property taxes have become far more burdensome since Mayor Emanuel’s record hike back in 2015 and Lightfoot’s decision to tie property tax hikes to inflation. In communities like Pilsen, property taxes have doubled or even tripled for some residents in recent years.
Johnson shouldn’t be surprised by his predicament. When setting his 2024 budget plan, he called for raiding over $400 million from the city’s TIF funds to fill an expected $500 million hole in the city’s corporate fund (the city’s operating budget).
Nevertheless, he still committed $315 million to migrants and used the last of the city’s federal covid money ($374 million) on programs that can’t be sustained, like universal basic income.
Then there are other, unaccounted-for expenses. Johnson knew that the city’s next police and fire contracts would be coming due, increasing costs by hundreds of millions. He also ignored the fact that the city may be forced to make an additional $175 million pension payment on behalf of CPS, which we detailed here.
In other words, Johnson locked in spending without sustainable future revenues to pay for them – revenues that are now on their way down, per the city’s own projections.
The details
Chicago’s operating fund finished out 2019 with $3.8 billion in expenses (see #1 in graphic below). At the time, the city’s financial situation was dire. Pension costs were skyrocketing and borrowing money was increasingly difficult due to Chicago’s junk credit rating. Reforms were the only way out.
Unfortunately, covid presented the city with billions in windfall revenues – not only from the federal government’s direct bailouts, but also from the additional revenue brought in by the inflationary economy. By 2022 the city’s revenues had jumped to nearly $5 billion, and by 2024 Johnson counted on $5.8 billion to come in (see #2 below). That was $2 billion more than in 2019 – an increase of 58%.
But those revenues aren’t panning out, with the corporate fund estimated to only bring in $5.4 million this year (see #3 below). Even with expenditures adjusted down to $5.6 billion, that will still leave the city with a $200 million deficit to close out 2024.
The real trouble comes next year in 2025. Johnson’s baked-in expenditures are projected to jump to $6.2 billion, while revenues will continue their drop to $5.2 billion, resulting in the $1 billion deficit (see #4 below).
The next two years are projected to be even worse, with the city expecting a $1.1 billion deficit in 2026 and a $1.3 billion deficit in 2027. The city has even projected a “negative” outlook that has the city losing $2 billion in 2027.
Unsurprisingly, the cost drivers behind the deficits are massive labor cost increases, more spending on contracts, and of course, growing retirement costs.
Between 2024 and 2025 the city’s corporate fund expenditures are expected to grow by nearly $600 million in 2025, with higher pension payments (up $150 million) and personnel services (up $349 million) responsible for most of the increase.
Revenues, meanwhile, are set to fall by nearly $200 million.
All on taxpayers
The bad news for city taxpayers comes on the heels of a similar announcement for Chicago’s other big government, the Chicago Public Schools. We wrote recently about the coming deficits there, also on path to hit a $1 billion shortfall in 2026. The same residents that will get hit by the more fees and tax hikes – or cuts to government services – to fund the city’s shortfalls will also get hit by the school district’s financial mismanagement.
Chicago is back to the same fiscal problems it faced in 2020 before the covid bailouts papered over the city’s problems for a few years. Now the federal money has dried up and the deficits have reappeared, exposing the city’s mismanagement of funds.
Unfortunately, it will be Chicagoans who will have to pay for that mismanagement through higher taxes.
Read more from Wirepoints:
- Wirepoints joined Univision Chicago to discuss the expected $1 billion budget deficit coming to Chicago in 2025
- Chicago’s 2025 budget fiascos. First up, Chicago Public Schools.
- Illinois’ Gov. Pritzker delivers Democrats’ national economic pitch at DNC. A look at his own record is revealing.
- It’s not racist to call Chicago the nation’s murder capital. The Chicago Sun-Times has 617 reasons to call it that.
- The DNC is coming to Chicago, the nation’s homicide capital 13 years running – A Wirepoints survey of America’s 75 largest cities
- Chicago’s worst-in-nation pension crisis strikes again
Audio and summary 
If this bill passes, say goodbye to local control over all Illinois parks and expect to see open drug and alcohol use, needles, no sanitation and fire hazards, but no ordinary park users.
Good. Stupidity has its just rewards.
One of the biggest costs of any business, private or governmental, is labor. Back in the good old days of “defined benefit” plans back in the 60’s and early 70’s, the defined benefit plans normally provided 40% of your retirement income, more or less. 30% of your retirement income came from Social Security, more or less….and you were on the hook thru your own savings for the last 30% or so. When you look at government pensions today, many government employees are retiring at 90% or more of their highest year of base salary earnings and sometimes at more than… Read more »
Please give a few examples where public employee systems in IL and maybe elsewhere pay out at least 90% of an employee’s final base pay. I may be wrong here, but I don’t think any such pension systems exist in IL. I think you are taking “dramatic license” simply to hype your strongly held point of view, and I’d appreciate credible substantiating evidence showing I’m wrong about that. Barring that I’ll say pigs can fly, although I can’t give you credible substantiation for it, I admit.
Elementary teacher friend of mine retired at age 55. Actually earlier as she filed a disability claim to bridge from age 53 to 55. Had the assistance of a skilled lawyer. In any event, she made 84 thousand when she retired. Thereafter received 71 thousand in pension payments. Not 90 percent, but above 80 percent. Given inflation she is happy to have the 3 percent increase each year. This of course is anecdotal and her disability (legitimate) could make her situation fuzzy in terms of predictability. By the way, she is a U of I grad with really high grades… Read more »
Chicago is close to approaching 2% of value on residential. That is still 1/2 of Rockford %. Belvidere is now around 3%. What has helped a little is the increased home values (finally) after decades of stagnant or depreciating values due to high property tax rates. Commercial and industrial properties have the same rate as residential so they do not offset homes as they do in Chicago.
I received a reassessment notice a few days ago. It went up $41.000.00 Lordy Lordy.
Typical Chicago bungalows still have very low taxes compared to most suburbs. I looked up the house of my childhood (prior to 1961) a bungalow at 6023 S. Tripp. Valued at $270,000 now the 2022 taxes were only $3,800. In most suburbs a 270K home would be nearly double that in taxes. I don’t know what to make of this single example. But in the remaining nice southwest and northwest bungalow belts, those homes are still a great bargain and very well built.
Maybe, but as I commented before, Chicago residential PT rates are catching up to the suburbs and will be even more so at some point next year when the smoke clears. Also, comparing Chicago PT rates to the suburbs is like comparing your baseball team to the Sox and saying you have a better record.
First he will try to get a City income tax, which will go nowhere in Springfield. Then he will try for a transaction tax on the exchanges, which will go nowhere. Then he will come up with some “temporary” solution of some type or another which might fly because Chicagoans, who were stupid enough to vote for him in the first place, might fall for the facade. If that doesn’t work, he will blame systemic racism, disinvestment in the hood, global warming, Trump and the Republicans for a property tax increase.
Like I’ve said many times. It is NOT a spending problem. It is ALWAYS a revenue problem.
What happened to all the media hoopla– Chicago’s the greatest city on earth/ DNC convention of “joy” from couple weeks ago????? So convenient for CTU/Brandon & crew to release to press all the disastrous city & CPS budget news AFTER convention. If you’ve lived here for any length of time you just feel, once again, your be played as chumpie taxpayer getting setup for GIANT prop tax hike while CTU, FOP, XYZ are walking away with $$$$GIZANGO$$$ deals as usual…….while somehow your supposed to buy into progressive shtick that Brando & crew are fighting for the little guy…..who are the… Read more »
The Leftist Democrats expect Springfield and state taxpayers to pay Chicago and CPS’s bills – Look how Pritzker and Democrats dog-robbed the gasoline taxes to pay for the CTA jobs program.
“The problem with socialism is that you eventually run out of other peoples’ money.”
Margaret Thatcher
And we know all the liberals support the National Socialist Workers Party too!
The treasurers office should include a tube of lube with the March property tax bill.
To state the obvious, if you raise taxes then more residents will flee, putting additional downward pressure on future revenues. The next question then becomes, will those fleeing Chicago taxes also flee Illinois? I realize WP readers get weary of comments from myself and others encouraging Illinois residents to get out, but I feel a bond with others here. We as a group know what’s coming, and it’s all bad. It’s easy to be complacent, take it a day at a time, and stay in place. It would be a shame if WP readers waste the information and end up… Read more »
You are behind the data. Residents leaving Illinois have been leading the state exit parade for some time. That is unlikely to stop because other than bankruptcy, there is no solution to the fiscal nightmare. The costs associated with the poorly managed pension contributions and unfunded liabilities is devouring the money needed to actually run/manage the city. That will only get worse.