Chicago closed the books on 2024 with an unassigned balance of zero for the first time in recent memory, in part because the Chicago Public Schools failed to reimburse the city for a $175 million pension payment for non-teaching school employees.
At the end of 2023, the unassigned balance not yet dedicated for a specific purpose was $226.6 million, even after Johnson followed his predecessor Lori Lightfoot’s lead by devoting $306.6 million to a “pension advance” that exceeded Chicago’s statutory requirement.
But a year later, the consumer equivalent of the city’s operating checkbook was totally depleted and the city’s overall deficit was $161 million.
Chief Financial Officer Jill Jaworski cited two factors outside the city’s control for that unprecedented decision: a $165 million reduction in Chicago’s share of revenues from the personal property replacement tax, and the disputed school pension payment.
Mayor Brandon Johnson assumed CPS would reimburse the city and chose to include the $175 million pension payment in both his 2024 and 2025 city budgets. But the city has yet to receive that payment from CPS, and it’s one of the reasons why CPS CEO Pedro Martinez was fired.
“We would’ve had a significant surplus had we received one or both of those,” Jaworski told reporters. “Because of those two items, we ended up in a deficit position and…ended up using up…the unassigned fund balance.”
Jaworski stressed that Chicago still has over $6 billion in cash, including long-term reserves generated by former Mayor Richard M. Daley’s decision to forgo decades of revenue by privatizing Chicago parking meters and the Chicago Skyway; enterprise and tax-increment-financing (TIF) funds, and a total fund balance of $360 million.
Interim Comptroller Mike Belsky described the unassigned balance as the “bottom of…a waterfall,” adding, “You have to look at all categories of fund balance — not just unassigned.”
Last week, Interim CPS CEO Macquline King pegged the CPS budget deficit at $730 million — hundreds of millions more than the one released by Martinez — that includes the disputed pension payment.
“We’ve overcome a big hurdle with CPS…They’re being realistic about what their actual budget gap is. And it does recognize this commitment,” Budget Director Annette Guzman said.
Downtown Ald. Bill Conway (34th) said he remained worried about the city’s financial outlook, even though city revenues are “over-performing” by $78.7 million through the first five months of this year, and city spending is down by $79 million.
Ending 2024 with an unassigned fund balance of zero still “gives me great concern, as is the entire fiscal mess that we’re facing,” Conway said.
Equally alarming to Conway is the fact that the disputed CPS pension payment “was actually $289 million and the mayor’s office, without talking to anybody, let them take it down to $175” million, Conway said. “It’s amazing that he couldn’t get the school board that he appointed a majority of to even cover the reduced portion.”
Monday’s briefings were timed to coincide with the June 30 release of the comprehensive annual financial report by Deloitte that doubles as the city’s audit.
The mayor’s budget team also released preliminary results of a consulting study that finds legalizing video gaming in Chicago is not worth pursuing.
A consultant hired by the Johnson administration has concluded that video gaming revenue would be nominal at best, and that legalizing those machines in Chicago bars and restaurants could actually end up costing the city money because of the impact it would have on slot machines at Bally’s temporary casino — and the permanent casino it is building in the River West neighborhood.
That’s in part because the tax on slot machine revenue would be nearly four times higher than it is on video gaming terminals.
For years, City Council members across the city have pushed for Chicago to lift its ban on video gaming. They have viewed it as a financial panacea of sorts and a salvation for neighborhood bars and restaurants struggling to stay in business.
Jaworski was asked whether she hopes the new research drives a final nail into the coffin of video gaming in Chicago.
“What the data says is that it makes a really big difference on casino revenues…It shows that we’re not gonna make much. We risk actually losing money and having less revenues overall from gaming. And if we do make money, it’s not going to be a very large lift,” she said. “So, it may put it to rest.”
Finance Committee Chair Pat Dowell (3rd) said she was “not impressed with the numbers” she heard from the city study. But Dowell added, “For the last three years, video gaming advocates have been clamoring for the city to implement” video gaming and, “I don’t know that this kind of analysis is going to put that chatter to rest.”