Chicago Faces Unprecedented Financial Hurdles Due to Delayed Budget Process

Mayor Brandon Johnson’s budget timeline shift could spell tough choices for Chicago’s future

Chicago Mayor Brandon Johnson criticized for shifting timeline to start budget talks as city leaders worries about financial falloutPhoto byScreen Capture/Youtube Video [Creator]

CHICAGO, IL — In a city already grappling with a monumental budget deficit, Mayor Brandon Johnson’s decision to delay the unveiling of the 2025 budget has sparked significant debate and concern among Chicago’s City Council members and financial experts. The nearly $1 billion gap, looming since last fall, represents one of the most challenging fiscal hurdles the city has faced in recent memory. With time ticking, the decision to push back the city’s annual budget process to late October has placed both the administration and City Council in a bind.

Though the delay itself may only be a couple of weeks, it is raising questions about how effectively Mayor Johnson and his team can navigate Chicago’s deep-rooted fiscal problems while also managing an increasingly fractious City Council. The mayor’s decision comes at a time when the city is facing a rapidly approaching statutory deadline of Dec. 31 to pass the budget—a timeline that leaves little room for amendments or debates.

A Daunting Deficit

The city’s projected $982.4 million deficit for 2025 is no surprise. It’s a continuation of years of financial strain, exacerbated by structural deficits that have been building for decades. These problems have been compounded by factors such as escalating pension obligations and infrastructure financing challenges. The Mayor’s administration announced last year a similarly large gap, but this year’s figures have driven the need for immediate solutions.

“We’re not responsible for the decisions made decades ago, but we’re the ones who need to fix them,” Mayor Johnson told reporters. “Our goal is to not only close this deficit but to create a sustainable plan for Chicago’s future.”

Despite Johnson’s optimism, his decision to delay the budget process has many on the City Council feeling apprehensive. Aldermen, already under pressure from their constituencies, now face an even more condensed timeline to review and propose amendments to the spending plan. As department hearings are now scheduled to conclude just before Thanksgiving, many council members are left with concerns about how effectively they can navigate the complex financial discussions ahead.

Political Ramifications

The tension is palpable within the council chambers. Last month, 33 council members opposed Johnson on a key vote regarding the use of ShotSpotter technology, a clear sign of the mayor’s waning influence over the council. Johnson’s intergovernmental affairs office, responsible for maintaining relations with aldermen, has recently undergone a shake-up that further strained relations between the mayor and the City Council. With Johnson requiring at least 26 votes to pass his budget, it’s unclear if he can secure the necessary support.

Alderman Matt Martin, a progressive voice within the council and a member of the mayor’s leadership team, didn’t mince words when expressing his frustration over the delay. “It’s hard to understand why we’re spending less time on reviewing something as important as the city’s budget when we’re facing such a significant deficit,” Martin stated. “This delay is a mistake, and I’ve told the administration as much.”

Balancing the Deficit

The most pressing question is how Mayor Johnson intends to close the massive deficit without alienating his political base. Johnson, a first-term mayor elected with the support of Chicago’s progressive and labor movements, faces difficult choices. During his campaign, Johnson pledged not to raise property taxes, a politically charged stance that could prove untenable in the face of such a large deficit.

Options on the table include increasing fees or levies, cutting city services, and seeking one-time revenue sources such as borrowing or refinancing debt. There’s also the possibility of reducing funding for specific programs, such as those supporting migrant populations, although such cuts could spark political backlash.

“Ideally, we want to avoid layoffs or furloughs,” said Johnson’s spokesperson. “But the reality is, we need to balance this budget, and that’s going to require making some hard decisions.”

Financial Entanglements with CPS

Further complicating matters is the ongoing tension between City Hall and Chicago Public Schools (CPS). At the heart of the conflict is a pension payment for non-teacher employees of CPS—a cost that used to fall under the city’s budget but was shifted to CPS under former Mayor Lori Lightfoot. Johnson initially opposed this change, but now he is fighting to keep it as part of the school district’s responsibility. If CPS were forced to absorb this $175 million obligation again, it would help shrink the city’s budget deficit but might cause further instability within CPS.

Pedro Martinez, CEO of CPS, is expected to step down soon, in part due to disagreements with the Johnson administration. Financial experts warn that the wrangling over pension obligations could hurt the city’s reputation with investors.

“The pension issue is the biggest hot potato here,” said Joe Ferguson, president of the Civic Federation. “These kinds of financial entanglements between the city and CPS create instability that doesn’t instill confidence in the investment community.”

Property Taxes Back on the Table?

While Johnson has remained firm in his opposition to property tax increases, the reality of the situation may force his hand. Property taxes, though deeply unpopular, represent one of the most reliable revenue streams available to the city. As Chicago faces high commercial vacancy rates, there’s growing concern that property tax increases could disproportionately affect homeowners.

Moreover, the city’s automatic inflation-based tax increase, which was paused by Johnson last year, could be reinstated. Even so, this provision would only generate around $87 million, a mere fraction of what’s needed to close the nearly $1 billion gap.

“The truth is, a property tax hike may be unavoidable,” said Justin Marlowe, director of the Center for Municipal Finance at the University of Chicago. “If the city wants to make a meaningful dent in this deficit, we’re likely going to need to see increases beyond inflation adjustments.”

Other Revenue Options

Aside from property taxes, Johnson could turn to other revenue-generating measures, many of which were central to his campaign platform. His proposal to reinstate a corporate head tax and raise hotel taxes, among other measures, has seen little progress thus far, but the mayor could reignite these discussions. The Bring Chicago Home initiative, which sought to raise additional funds for homeless services through increased property transfer taxes, was defeated earlier this year, but similar revenue-raising efforts could return in future talks.

The city could also look to its tax increment financing (TIF) districts for additional funds. Johnson tapped into a record $433.8 million from TIF surpluses for the 2024 budget, and while this tactic has been criticized as a short-term fix, it could be used again to plug part of the 2025 deficit.

“There’s always a temptation to use one-time fixes like TIF surpluses,” Marlowe added. “But the risk is that it doesn’t address the underlying structural issues. It’s like putting a band-aid on a much bigger wound.”

Challenges Within City Council

Mayor Johnson’s relationship with the City Council is another wild card in the upcoming budget negotiations. While his progressive allies have pushed for additional investments in affordable housing and violence prevention programs, moderate and conservative aldermen are wary of any proposals that might exacerbate the city’s financial problems.

Alderman Scott Waguespack, a frequent critic of Johnson’s policies, accused the mayor of allowing his ties to the Chicago Teachers Union to dictate his financial decisions. “The mayor needs to realize that he’s representing the entire city now, not just the teachers’ union,” Waguespack said. “He’s got to find a way to balance this budget that works for everyone, not just his political allies.”

Labor Costs and Upcoming Negotiations

The city’s labor costs will also play a critical role in shaping the 2025 budget. Johnson’s administration has already agreed to significant pay raises for the Chicago Fraternal Order of Police, and similar negotiations are expected with the city’s firefighters’ union. These raises, while necessary to retain essential personnel, will add pressure to an already strained budget.

Back pay for firefighters dating back to 2021 is expected to be a significant expense, and it’s unclear whether the city will be able to absorb these costs without further cuts to services or increases in taxes.

Progressive Goals at Stake

Even as financial pressures mount, Johnson’s progressive agenda remains a priority for his administration. In his first budget, Johnson successfully reopened two mental health clinics and reinstated a Department of Environment, albeit in a scaled-down form. These initiatives are seen as symbolic victories for the city’s progressive movement, but they come with costs that must be factored into the upcoming budget.

“There’s no question that investing in mental health and environmental sustainability is critical,” said Alderman Maria Hadden, chair of the City Council’s Progressive Caucus. “But we need to be strategic about how we allocate these funds, especially when we’re facing such a large deficit.”