Chicago mayor unveils ‘first step’ budget that holds line on taxes

Chicago Mayor Brandon Johnson Wednesday unveiled a $16.6 billion all-funds spending package he dubbed the “people’s budget” that “begins the critical investments necessary” to usher in his progressive vision of solving the city’s significant fiscal and social challenges.

The budget proposal features little in the way of new taxes or fees despite Johnson’s campaign pledge of raising more than $800 million in new annual revenue. The budget holds the property tax levy flat, drops his predecessor’s policy of linking property taxes to inflation and does not include any of his campaign’s major revenue proposals, such as a corporate head tax or tax on financial transactions. Many of his campaign tax proposals would need approval from the General Assembly.

The administration’s first major revenue push, to raise the real-estate transfer tax on properties above a certain threshold in order to generate $100 million annually — which business groups warn would hurt an already-hurting downtown real estate sector — is not included in the budget as it still needs to win approval from the City Council and voters.

Chicago Mayor Brandon Johnson speaks at the Bond Buyer’s second annual infrastructure conference on Sept. 13. Johnson released his first budget plan.

Alan Klehr

“It’s one budget,” Johnson told reporters during a press conference after introducing the budget to the city council. “You’re talking years and years of historical neglect. And we are well on our way of weening ourselves off of failed, regressive taxes.

“Everybody knows we’re going to need new revenue. Everybody knows that,” Johnson said, adding, he’s relying on the newly created revenue subcommittee on the city council to advance ideas. “We’re working hard every day to come up with solutions to the revenue dynamic.”

The 2024 corporate fund, the city’s main account, totals $5.7 billion, up 5% from last year’s $5.4 billion investment. Revenues in 2024 are expected to total just under $5.3 billion, according to budget documents.

Johnson took the helm in May after Chicago enjoyed a series of ratings upgrades as it moved toward structural balance and implemented a policy of supplemental pension payments.

Johnson plans to continue that policy, proposing a $307 million supplemental pension payment on top of a statutorily required $2.75 billion payment in 2024. This year’s pension payment for the first time will benefit from the city’s new casino, with the budget anticipating $35 million in revenue in 2024 before growing to what the city estimates at $200 million annually. Under state law, the gaming money must be sent to the city’s underfunded fire and police pensions.

The budget notes that while the supplemental payments are “more costly in the short term, this and future supplemental payments are expected to reduce the city’s future pension contributions by approximately $2 billion through the amortization period of the respective pension funds.” Last year’s advance payment also prevented roughly $30 million in losses due to asset liquidations, the budget said.

Less than a month after releasing a budget forecast that warned of a $538 million deficit, the actual budget revises 2024 revenues upward by $186 million, due in part to tourist and entertainment taxes and from the city’s slice of state income tax and personal property replacement tax, which is estimated to be up 66% from last year.

To close the remaining shortfall, Johnson proposed $113 million in “operational savings,” $41.5 million in “personnel savings,” and $89 million from a bond refinancing, as well as other one-time fixes, like tapping the prior year fund surplus for $50 million and taking $50 million from a tax increment financing district surplus. The city overall will take $100 million from the TIF surplus for the 2024 budget.

Investments include roughly $150 million to deal with the rising number of migrants arriving in the city, a figure down from the $200 million in the budget forecast, as the city hopes the state and federal government will kick in more money next year.

Johnson told reporters he has asked for help with shelters, staffing and “help at the border.”

“The responsibility can’t just be on the city of Chicago alone,” he said.

Other investments include Johnson’s signature Treatment Not Trauma program, which reopens mental health clinics and hires more civilians in the police department, as well as creating a Department of Environment, a Department of Technology and Innovation, and an Office of Labor Relations within the mayor’s office.

The city has $460 million remaining from the $1.9 billion of federal COVID relief grants, which must be appropriated by the end of 2024 and spent by the end of 2026.

The budget committee will hold hearings on the proposed budget throughout October, starting with finance officials on Monday. The city council is set to vote on the plan before Thanksgiving. The city’s fiscal year begins on Jan. 1.