* Crain’s…

Facing a budget shortfall of $982.4 million for 2025, Mayor Brandon Johnson is considering temporary freezes and permanent reductions in the city’s workforce while potentially going back on a campaign pledge to not raise property taxes.

The 2025 gap must be bridged before the City Council approves his second annual spending plan later this fall, even while city officials seek to close out a $222.9 million deficit remaining in 2024. This year’s shortfall is tied to a reduction in corporate tax revenue and a $175 million pension payment Chicago Public Schools refused to include in its own budget, despite Johnson’s insistence it’s the responsibility of the district.

Johnson won’t release his plan to address the $982.4 million shortfall until October, but in a call with reporters yesterday he said, “There are sacrifices that will be made.”

“Our focus is to minimize, as much as we possibly can, the impact on city services, programs and of course our workforce,” he said.

Click here for the city’s full budget forecast.

* Sun-Times…

Johnson’s hand-picked Chicago Board of Education approved a $9.9 billion budget that does not include the $175 million pension payment for non-teaching school employees. The city absorbed that payment until Johnson’s predecessor off-loaded that cost to the Chicago Public Schools.

In an unprecedented rebuke, CPS CEO Pedro Martinez and the CPS board rejected the mayor’s request to take out a short-term, high-interest loan to cover the pension payment and the cost of a new teachers contract. That’s why the mayor is laying the groundwork to dump Martinez. […]

Johnson is still holding out hope for a reversal on the school pension issue.

He noted CPS has absorbed the payment for non-teaching members of the Municipal Employees Annuity and Benefit Fund “for the last four years.”

* Block Club…

But during Wednesday’s briefing, the mayor and other city officials declined to say if an increase is on the table to balance next year’s budget.

“This is just a forecast, it’s a moment in time, and so no decision will be made just based upon a forecasting,” Johnson said. “But what I will say is that I’m very much committed to our overall vision of investing in people, and making sure that we address the structural damage that has been in place for some time.”

Pressed by a reporter if that means he’s not ruling out a property tax hike, the mayor again did not give a definitive answer.

“What I can say is that there are plethora amount of options … we’re going to continue to work with City Council and all stakeholders to come up with viable solutions that will [offer] sustainability,” he said.

* Chicago Mayor Brandon Johnson…

Today, Mayor Brandon Johnson released the City of Chicago 2025 Budget Forecast, offering a comprehensive financial outlook that addresses the City’s current year-end estimates and outlines projected revenues, expenditures, and fiscal challenges for fiscal years 2025-2027. These projections are informed by historical revenue and expenditure data, current economic and expense trends, and other factors expected to impact the City’s finances.  

The forecast is built on a robust analysis that integrates these various data points, ensuring that the 2025 budget is developed with a full understanding of the City’s financial state and a forward-looking perspective. This approach allows the City to strategically consider long-term fiscal consequences. The forecast primarily focuses on the City of Chicago’s Corporate Fund — its general operating fund responsible for funding basic City operations and services — where the largest disparities between revenues and expenditures have historically occurred.  

The collective work of the City’s fiscal teams, made up of the City Budget Office, Chief Financial Officer, and the Department of Finance, has identified an estimated year-end budget deficit of $229.9 million for 2024, and a projected 2025 fiscal year budget gap of $982.4 million. These gaps are largely driven by rising personnel, pension, and contractual costs, alongside a decrease in specific revenue streams. 

“The 2025 Budget Forecast presents a significant challenge for our City, with a nearly $1 billion gap that we must address thoughtfully and strategically,” Mayor Brandon Johnson 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.” 

Budget Director Annette Guzman added, “The forecasted budget gap is a clear indication of the financial pressures facing the City of Chicago. It also highlights the critical need for structural solutions that address these challenges not just for the
coming year, but for the future. We will continue to explore all options to close this gap while minimizing impact on essential services and making prudent investments in our city’s future.” 

Year-End Estimate 

The year-end projected shortfall is driven by a decline in specific revenue streams, including the State Personal Property Replacement Tax (PPRT) and the City not receiving the budgeted $175 million reimbursement for pension contributions for Chicago Public Schools’ (CPS) non-teacher staff.  

Local tax revenues have remained resilient, with an estimated 0.8 percent increase over budget projections, buoyed by stronger-than-expected performance in transaction taxes and ground transportation taxes. However, these gains were offset by lower-than-anticipated utility taxes and other revenue sources. The City continues to leverage fund balances and explore additional cost-saving measures to ensure fiscal responsibility and an end-of-year balanced budget. 

While economic conditions may fluctuate throughout the remainder of the year, potentially impacting the City’s finances in either a positive or negative direction, Mayor Johnson and his fiscal leaders are laser focused on containing expenditures through disciplined spending and by maximizing available resources in the months ahead. 

2025 Budget Forecast 

Looking ahead, the 2025 forecast projects a substantial budget gap of $982.4 million, reflecting the City’s ongoing revenue challenges and rising costs. The forecast anticipates continued pressure from lower PPRT revenues and the expiration of one-time funding sources that helped close gaps in previous years. Additionally, rising personnel costs, driven by contractual wage increases, cost-of-living adjustments, and updated pension contributions, are significant factors contributing to the projected gap. 

The forecast also highlights an increase in contractual services expenses, expected to rise by $16.1 million from 2024 levels, due to inflationary pressures and planned enhancements in information technology services.  

The 2025 Budget will mark the sixth year for the City’s Police and Fire Pensions, and the fourth year for the Municipal and Laborers Pension Funds, in which contributions will be based on actuarially calculated, statutorily required contributions. The City plans to make advance pension payments totaling $272 million in 2025, further demonstrating its commitment to addressing long-term pension liabilities. 

“While the road ahead may be challenging, I am confident in our ability to navigate these difficulties with the strength and resilience that Chicagoans are known for,” Mayor Brandon Johnson said. “Together, we will build a budget that not only addresses our current challenges but also lays the foundation for a brighter, more prosperous future for all.” 

* WBEZ…

Despite savings this year, the nearly $223 million end-of-year deficit in the city’s corporate fund is affected by a $417.7 million underperformance of revenue, primarily from a decline in personal property replacement taxes and the refusal of Chicago Public Schools to make a pension payment that the city was counting on. The new end-of-year deficit comes after budget officials had passed a $16.77 billion dollar budget to close a previously estimated $538 million gap for 2024.

“We’re not overspending our budget,” Budget Director Annette Guzman said. “We have lagging indicators with some of our revenue sources.”

While Johnson stressed the ultimate goal is to not implement hiring freezes, the city would take into account “a number of factors” Guzman said. The Chicago Police Department faces a shortage of officers, and Guzman noted some positions within the police and fire departments are required by the federal consent decree and union contracts. […]

Guzman said Wednesday the city currently plans for $150 million to go toward supporting asylum seekers next year. That was the amount Johnson initially included in his 2024 budget — and he later returned to a testy City Council to ask for $70 million more from city reserves to continue the city’s support of migrants.

* Tribune…

ast November, Johnson proposed a $16.8 billion 2024 budget that passed with relative ease, even as critics sounded the alarm on one-time fixes for plugging in the projected $538 million deficit at the time.

The challenge for the City Council and Johnson now is to try to balance the 2025 budget without hiking property taxes, a red line Johnson drew during his mayoral campaign. Doing so could raise much more money than other revenue ideas but would also subject elected officials to the ire of Chicagoans weary of living under high levies and other rising costs. This year’s property tax levy was $1.77 billion, up from $1.47 billion in 2019 and $860 million a decade ago, according to the forecast.

Other efforts by Johnson to boost revenue failed in his first year in office.

The mayor campaigned on a bold agenda of taxing the rich, but his to-do list that included bringing back a corporate head tax, hiking the hotel levy and raising the real estate transfer tax has stalled. The third pitch, known as the Bring Chicago Home campaign, was rejected in a March tax referendum that signaled voter reluctance to entrust elected officials with more public money.

This year’s massive but not unexpected $982 million gap has already been in aldermen’s crosshairs.

* CBS Chicago…

Last year, Johnson plugged a $538 million budget gap for 2024 without layoffs or tax increases, but relied a great deal on one-time financial fixes, including declaring a surplus of tax increment financing funds, and rolling over a $50 million budget surplus from 2023.

In addition to rising costs for city employee salaries and pensions, the mayor’s budget team pointed to dropping revenue from two key tax sources as key factors in the $982 million projected shortfall for next year.

Budget Director Annette Guzman said the city is expecting continued drop in revenue from the personal property replacement tax – a tax on corporations collected by the state and passed on to local governments. The city saw a drop of $169 million in revenue from that tax in 2024, and is expecting an even bigger drop in 2025. […]

Another factor putting pressure on the city’s budget for next year is ongoing contract talks with the union for the city’s firefighters and paramedics, who have gone more than three years without a new contract.

* More…

* WTTW | Chicago Faces $982M Budget Shortfall in 2025, $223M Gap in 2024: Johnson: City officials said they have also set aside funds in anticipation of reaching a new labor agreement with Chicago firefighters, who have been working without a contract for three years. Guzman declined to detail how much the city had budgeted, citing ongoing negotiations.