A follow-up report commissioned by Mayor Brandon Johnson lays out an array of revenue-generating options that includes a sales tax on virtually “all consumer services,” taxing high-volume electricity users at a higher rate, and imposing a congestion fee on “vehicles entering or exiting a designated central area during peak periods.”
To chip away at Chicago’s $36 billion pension crisis and erase the city’s structural deficit, the 24-member group of civic leaders is also suggesting offering retirees lump-sum payouts in lieu of monthly pension checks, consolidating actuaries and administrators of the four city employee pension funds and restoring the automatic escalator locking in annual property tax increases at the rate of inflation.
Last year, Johnson gave the group chaired by influential businessman Jim Reynolds and Chicago Urban League President Karen Freeman-Wilson carte blanche to create a road map to erase Chicago’s $1.15 billion budget shortfall.
Their initial report outlined ideas with potential to save the city as much as $455.5 million and generate as much as $1.65 billion in new revenue.
The follow-up report from the Chicago Financial Future Task Force includes long-term suggestions.
It’s aimed at solving the “persistent structural imbalance” in the city’s operating budget and at finally confronting the $36 billion pension crisis that could force two of the four pension funds into bankruptcy.
For years, the city has used “temporary resources and short-term operating actions” to balance its budgets. They include: hiring freezes, deferred investments, the nearly $1.9 billion avalanche of federal pandemic relief funds and the $1 billion tax increment financing (TIF) surplus that Johnson declared last year to bail out the Chicago Public Schools and bankroll a new teachers contract.
“The existence of a structural gap… has been a defining feature of the City’s fiscal outlook for several years. What has changed is its magnitude and durability. As temporary resources unwind and costs continue to grow, the gap is projected to emerge at a scale that materially constrains future budgets,” the report states.
“The stakes of inaction are not merely financial. If the City continues on its current path, fixed and legacy costs will absorb a growing share of available resources, leaving less flexibility to maintain reliable services, invest in neighborhoods, respond to downturns, or support long-term competitiveness… A city that cannot predictably finance its core commitments will increasingly be forced into reactive choices that are more disruptive, more costly, and less fair.”
Although the report outlines a “credible, sequenced progrram of action” that “protects core services,” the task force acknowledged that, “The path forward will call for difficult choices, continued collaboration, and care in balancing fiscal responsibility with the services and investments on which residents and communities depend.”
In addition to pension consolidation and offering a lump-sum payment option, the report recommends that the city “prioritize” the pension advance initiated by former Mayor Lori Lightfoot and continue it until it is “no longer necessary.”
The $175 million pension payment for non-teaching school employees that triggered the firing of Schools CEO Pedro Martinez should become the responsibility of CPS, potentially outlined by a formal agreement “potentially through the state,” the report states.
Because Gov. JB Pritzker signed a pension sweetener that threatens to make Chicago’s pension crisis $11 billion worse, the task force also suggests requiring the state to provide funding for any future increase in pension benefits.
Most of the ideas proposed on the revenue front — like a graduated income tax and expanding the state sales tax to “broadly encompass all consumer services excluding health care” — have either been shot down by voters or bandied about for years, only to be avoided because of the political controversies they would create.
New York City’s congestion fee has triggered numerous lawsuits and a failed attempt to block it by President Donald Trump. But the task force nevertheless suggests “equity-based, cordon-model congestion pricing” in Chicago that would impose a “fixed fee” on drivers “entering or exiting the central area of the city by car during weekday rush hours.”
The task force further recommends that Chicago “benchmark taxes, fees and expenditures continuously against peer cities” and raise those taxes, fines and fees that are comparatively low. And the city should lobby for a change in state law that would allow Chicago to tax the electric bills of higher-volume users at a higher rate while holding residential and small business customers harmless, the task force recommends.
To minimize settlements triggered by allegations of police abuse that cost Chicago taxpayers $246 million in 2025, the report recommends that the city “fill all restored consent-decree-related positions” and “accelerate implementation” of a long-stalled “early warning system” aimed at identifying problem cops.