Chicago faces nearly $1B budget deficit for 2025

CHICAGO — The City of Chicago is facing a nearly $1 billion budget deficit in 2025, on top of the deficit that remains from 2024.

The $982.4 million shortfall is attributed to increasing labor costs, a decrease in revenue from state corporate taxes, higher costs for city employee pensions and personnel expenses, $150 million allocation for ongoing migrant support, and the uncertainty surrounding the $175 million payment for Chicago Public Schools pensions.

Mayor Brandon Johnson said the hefty deficit is a reflection of the city’s ongoing revenue challenges and rising costs.

The Chicago Tribune reported Johnson’s administration has not ruled out on raising property taxes, implementing hiring freezes and layoffs to balance the 2025 budget.

The mayor and his budget team have not disclosed official details yet on their balancing strategy, but Johnson indicated their goal is to minimize potential cuts in city services.

In a statement he said, “My administration is committed to finding solutions that balance fiscal responsibility with our obligation to invest in the people of Chicago. Together, we will ensure our budget reflects the values of equity, fairness, and shared prosperity.”

By mid-October, the mayor must present a budget proposal to city council. This will be followed by weeks of hearings before the final spending plan is voted on in November.

Where does Chicago go from here?

“A billion dollars is a scary number, but it’s a manageable number, I think,” said Justin Marlowe , a research professor at the University of Chicago’s Harris School of Public Policy.

In a conversation with WGN’s Dana Rebik, Marlowe expressed concerns over the city’s multi-pronged problem when it comes to balancing Chicago’s budget.

The biggest question mark though, in his eyes, is how the city continues to address the artificially-manufactured influx of migrants from Texas.

“In many ways, that is the biggest question mark surrounding the budget forecast,” said Marlowe, who also serves as the Director for U of C’s Center for Municipal Finance. “The city has spent somewhere in the neighborhood of $500 million on the mission since the number of arrivals ramped up in 2022.”

Johnson promised during his mayoral campaign he would not raise property taxes to balance the budget, but with the budget gap as wide as it is, some residents worry he won’t be able to follow through with that promise.

“I don’t think he’s going to have much of a choice. Besides the deficit with the city, we have [Chicago Public Schools] needing more money,” said Cathy Villanueva, a Chicago resident. “The money is going to have to come from somewhere, and unfortunately, it usually comes from the homeowners.”

Although Johnson passed on the opportunity to offer specific areas of cuts to Chicago’s budget Thursday, experts like Marlowe expect the mayor to consider a hiring freeze on city employees and reductions in the city’s workforce as options.

“They’ll have to do many of the things they did last time,” Marlowe said. “Look at some spending efficiencies, potentially suspending some capitol projects.”

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