Chicago is grappling with a significant financial challenge as it faces a nearly $1 billion budget deficit for 2025. The city’s projected shortfall of $982.4 million, announced recently, has sparked concerns among residents and city officials alike, raising questions about where the city goes from here. The deficit, which is nearly double the gap faced last year, is attributed to rising costs, declining revenues, and expiring one-time budget fixes. These details were reported by WGN News‘ Dana Rebik and CBS Chicago’s Sara Machi.
Rising Costs and Declining Revenues
The hefty budget shortfall is primarily driven by several key factors, as outlined by Mayor Brandon Johnson’s administration. These include increasing labor costs, higher pension obligations for city employees and Chicago Public Schools (CPS), and a decrease in revenue from state corporate taxes. Notably, the city is also facing a $150 million allocation for ongoing support of migrants, a significant financial burden that has been growing since 2022, as reported by WGN’s Dana Rebik.
Impact of the Personal Property Replacement Tax
Annette Guzman, the city’s Budget Director, highlighted the continued decline in revenue from the personal property replacement tax – a tax on corporations collected by the state and passed on to local governments – as a critical factor. In 2024, the city saw a $169 million drop from this tax, and an even larger decline is expected in 2025, adding further pressure to the city’s financial situation.
The Migrant Crisis and Pension Costs
One of the most pressing concerns is the $175 million payment for CPS pensions, a cost the city once covered but had been paid for by CPS over the past four years. With CPS no longer covering this cost, it adds another layer of financial strain on the city’s already stretched budget. Justin Marlowe, a research professor at the University of Chicago’s Harris School of Public Policy, emphasized the complexity of the city’s budget challenges in his conversation with WGN’s Dana Rebik.
Challenges Posed by the Migrant Crisis
Marlowe noted that while $1 billion is a daunting number, it is still manageable. However, the ongoing influx of migrants from Texas – an issue Marlowe described as “the biggest question mark” in the budget forecast – complicates the situation further. The city has already spent approximately $500 million on the migrant crisis since 2022, a figure highlighted in Sara Machi’s report for CBS Chicago.
Tough Choices Ahead for Mayor Johnson
Mayor Johnson, who campaigned on a promise not to raise property taxes, now faces the difficult task of closing this substantial budget gap. While Johnson has not ruled out the possibility of raising property taxes, authorizing legalizing video gambling in Chicago, or placing slot machines at the city’s airports, he has been reluctant to provide specific details on his approach to balancing the budget, as mentioned in CBS Chicago’s report by Sara Machi.
Mayor Johnson Acknowledges the Need for Sacrifices
In a statement, Johnson acknowledged the need for sacrifices, saying, “The size of the budget gap is significant. It’s going to require decisions that will speak to our overall collective desire to build an economy that works for working people. There will be sacrifices that will be made.” However, he also emphasized his administration’s commitment to minimizing cuts to city services and finding solutions that balance fiscal responsibility with investment in the people of Chicago, as reported by WGN’s Dana Rebik.
Calls for Structural Changes and Spending Cuts
City officials and budget experts are calling for structural changes to address the budget deficit. Alderman Jason Ervin, who chairs the City Council Budget Committee, suggested that the city must start by looking at spending cuts before considering new revenue sources. “I think we have to look at everything, but at the same time we have to be reasonable so that we’re not impacting those that have generally been most harmed by taxes and fees throughout the history of our city,” Ervin said, according to WGN’s Dana Rebik.
Expert Opinions on Necessary Reforms
Joe Ferguson, president of the Civic Federation, a public finance watchdog group, echoed this sentiment, stating, “The chickens have come home to roost. It is time to get busy.” He suggested that Mayor Johnson might need to leverage his background in labor unions to find cost-cutting measures within city employee contracts. This perspective was also highlighted in CBS Chicago’s report by Sara Machi.
Tough Decisions and Potential Solutions
David Greising, president and CEO of the Better Government Association, pointed out that structural changes in revenue, as well as a more aggressive approach to cost-cutting, are necessary. “It’s clear that there needs to be some structural change in revenue, as well as a more aggressive approach to cost-cutting,” Greising said, reflecting on the challenges ahead for the city.
A Daunting Task for Chicago’s Leadership
As the city faces this nearly $1 billion deficit, the path forward will involve tough decisions, including potential spending cuts, layoffs, and possibly new taxes. The mayor is expected to present his spending plan to the City Council in mid-October, followed by a series of public hearings. The final budget plan must be approved by the end of the year, requiring the support of at least 26 alderpersons. While the deficit is significant, experts like Justin Marlowe believe it is manageable if the city can implement effective strategies and make necessary sacrifices.
“You Get What You Vote For”
People in the comments shared their thoughts: “When you have a budget director who is unqualified and incapable of actually setting a budget like a normal person you’ve reached peak failure in government”
One commenter said: “Chicago will still vote for the same people. You get what you vote for.”
Another person added: “It’s gonna get worse my fellow Chicagoans. There has never been a vision for fiscal health and balance in Illinois or Chicago.”
A Call to Balance Fiscal Responsibility and Community Investment
However, the challenge remains substantial, and the decisions made in the coming months will have long-lasting implications for the city’s financial health and the well-being of its residents. As both WGN’s Dana Rebik and CBS Chicago’s Sara Machi have reported, the need for structural reforms, strategic spending cuts, and potential revenue increases is undeniable. As the city navigates these challenges, the focus will be on balancing fiscal responsibility with the need to protect and invest in the community.
Investing in the Community
What do you think? What are the potential long-term impacts of raising property taxes on Chicago’s residents, particularly those already financially vulnerable? How can Chicago balance the need for fiscal responsibility with its obligations to invest in its community, especially in light of rising costs and declining revenues? What role should unions play in finding cost-cutting measures within city employee contracts, and how can the mayor leverage his background to facilitate this?
See the full videos on WGN News’ YouTube channel for more details here and on CBS Chicago’s YouTube channel here.
