One situation arose in aldermen’s anxious speeches final week forward of the vote on Mayor Brandon Johnson’s finances for subsequent yr: 2026.
Although the mayor finally gained a 27-23 victory on his $17.1 billion spending plan for 2025, City Council members, each for and in opposition to, warned that the chaos and delays which have dotted the previous few months could pale compared to the intractable issues that await subsequent yr. a.
Driving their issues is the dearth of long-term options that Johnson has supplied to the structural issues of Chicago’s funds, the concurrent fiscal crises in Chicago Public Schools and the Chicago Transit Authority, and the slim probability that new income streams from state arrive sooner or later. subsequent yr – regardless of the mayor repeatedly pinning his hopes on “progressive” taxes which are unlikely to materialize.
Meanwhile, Johnson and the council will function beneath rising political stress because the 2027 election approaches and budget-balancing efforts corresponding to elevated property taxes — which the mayor was relying on to shut the 2025 tax hole, solely to backtrack later Aldermen refused to vote in favor – in any other case cuts to the town’s workforce will probably develop into much more controversial.
But within the press convention after the council assembly, Johnson refused to simply accept an alarmist view of the long run. He additionally would not say what his Plan B could be if this progressive income does not arrive in time for the 2026 finances cycle.
“How about we simply concentrate on what we wish?” Johnson stated when requested if he would rule out attempting to move a future property tax enhance after aldermen referred to as him out on his newest try.
“I need you all to remain optimistic, OK, as a result of the individuals of Chicago and the state of Illinois actually demand this. Look, I do know it is simple to trip on this tax versus this tax, however individuals have been promoting out the individuals of Chicago for too lengthy and kowtowing to the pursuits of the ultra-rich.
Progressive income
The mayor has repeatedly stated the ball is in Springfield’s court docket in terms of discovering methods to make the rich pay extra to fill the town’s subsequent finances hole.
Johnson reiterated 4 occasions Monday that his administration is working with Pritzker on a “common foundation” to provide you with progressive income concepts. A supply near the governor stated she was “appalled” by Johnson’s feedback.
There have been no common, significant discussions between Johnson and Pritzker about discovering new progressive sources of cash, the supply stated.
Playing political scorching potato with the potential of progressive state funding might be a manner for the mayor to attempt to deflect blame if he has to resort to property taxes or different deeply unpopular methods to shut the town’s deficit, even when the Voters have a tendency to recollect officers who vote for painful raises, and the governor would probably vigorously problem any effort to make him put on the jacket for Chicago’s monetary woes.
Asked whether or not it’s sensible to anticipate the state to assist the town in its 2026 finances, the mayor’s finances director, Annette Guzman, stated Springfield will want “huge options” to resolve its pending finances deficit, and proceeds from such options might stream to the cities.
But Ald. Scott Waguespack, thirty second, accused the mayor of counting on an unlikely “trope” together with his progressive income calls.
“That’s bullshit…” stated Waguespack, who usually disagrees with Johnson. “I feel the mayor’s strategy is actually, ‘Let’s spend each penny we’ve got, and sooner or later, it will be another person’s drawback to take care of.’”
The metropolis is in steady situation now, Johnson’s ally, Ald. William Hall, sixth, stated, “however we will simply get into intensive care.” The prognosis means Chicago should look to Springfield, in addition to contemplate measures corresponding to chopping job vacancies, he added.
“We have to make extra aggressive strikes on the state stage, collaboratively,” Hall stated. “We cannot say we wish a caviar life-style with cash created from pork and beans.”
Hall, appointed by Johnson final yr to move the City Council’s new income subcommittee, which meets as soon as in 2024, recognized hemp merchandise, video playing and a reinstated grocery tax as potential new income streams for Chicago.
Aldermen took benefit of lots of the most reasonably priced charges, will increase and budget-balancing efficiencies this yr, making property tax will increase a probably extra mandatory device subsequent yr. But they are going to be simply over a yr away from re-election after they approve the 2026 finances, which suggests they are going to be much more frightened of voter response in the event that they resort to it.
Structural issues
Chicago has been beneath menace of a downgrade for a number of weeks on account of potential withdrawal from key long-term pension reform and continued lack of structural finances options. A downgrade is not only a reputational hit. It will increase the town’s value to borrow cash for long-term initiatives just like the Johnson Housing and Development Bond.
In mid-November, S&P put Chicago on credit score watch and warned there was a 2-to-1 probability of a downgrade — not lengthy after the town emerges from junk standing on the finish of 2022 — if it did an excessive amount of reliance on short-term options to unravel the issue. his hole.
Johnson’s 2025 spending plan does not resolve these long-standing issues, however Guzman says it is “a begin.”
“We should depend on structural options to assist our present bills,” Guzman informed the Tribune. “We cannot accomplish this in a yr.”
The metropolis mustn’t face a credit score downgrade, he stated, arguing that structural imbalances predate Johnson, and he started a gradual shift towards sustainability.
While Fitch and different monetary specialists say the town has performed nicely by sustaining the extra funds to maintain its pension funds afloat, in addition they famous that the town has closed a good portion of its hole — the Johnson administration estimates about 30% – with non-structural revenues.
That contains $132 million in surplus from tax increment financing to districts and about $140 million in surplus cash from previous years. Changes to please aldermen added extra one-time finances caps: $74 million in leftover federal pandemic American Rescue Plan Act funds and $53 million in financial savings the town is counting forward from its latest refinancing of bonds.
Michael Rinaldi, senior director of Fitch’s public finance group, stated this yr’s finances “just about ensures” subsequent yr will probably be a problem. Some of the structural fixes the town was relying on — a slew of latest taxes, charges and $286 million in operational efficiencies — “warrant a level of warning given the danger of implementation,” he stated.
While Johnson has usually blamed this yr’s hole on declining private property alternative tax income in Springfield, in keeping with Joe Ferguson of the Civic Federation, a few of his choices “definitely contributed” to it as nicely.
That features a 20 % elevate given to Chicago police over the lifetime of their latest four-year contract, a legislative change that Johnson blessed, including $1.06 billion to the police pension fund’s complete legal responsibility, and the choice to skip the property tied to final yr’s inflation. tax enhance.
A handful of sweeteners to safe the assist of allies – corresponding to a $500,000 snowplow driver and greater than $400,000 to fund a deputy mayor’s workplace – usually are not themselves big value drivers, however “a mirrored image of conditions small in scope and simply comprehensible the place cash is used earmarked and financial savings usually are not used, that are symbols of a bigger complete,” Ferguson stated.
Sister businesses
The metropolis’s sister businesses additionally face a monetary reckoning, which might have an effect on Johnson’s future finances cycles.
At CPS, Johnson has been concerned in a months-long energy wrestle with district management over a $175 million pension cost for non-teaching staff, in addition to a high-interest mortgage that might cowl that quantity plus the beginning of the subsequent contract of the Chicago Teachers Union. While it now seems that Johnson will have the ability to set up new management sympathetic to his stance on CPS that may soak up the pension funds and tackle the mortgage, the high-stakes drama highlights how intertwined the town and faculty district’s funds are.
Meanwhile, the CTA faces a $730 million fiscal cliff as soon as federal pandemic help runs out in early 2026. A Springfield invoice to consolidate the CTA with the area’s three different transit businesses, regardless of the objections of CTA management.
Johnson and the CTU tried to place the onus on Pritzker to fund CPS extra, however have been unsuccessful.
Ferguson was skeptical that Springfield would come to the rescue as a result of the state faces its personal fiscal reckoning subsequent yr and since Johnson’s most popular progressive tax reform has already been rejected by voters.
Asked whether or not he expects the Johnson administration to as soon as once more suggest property tax will increase subsequent yr, Guzman stated: “Every device needs to be obtainable.” But he added: “Stop studying the final web page earlier than studying the start.”
