Reactions to Mayor Johnson’s fiscal year 2026 budget proposal for Chicago’s corporate fund — the city’s primary operating budget that covers the core public services folks expect, like police and fire protection, streets and sanitation, and social services — were just like the movie: fast and furious.
Facing a projected deficit of $1.2 billion, or roughly 19% in fiscal year 2026, Johnson’s options were limited. There’s no way a hole that size could, or frankly should, be filled completely by spending cuts.
And classic “smoke and mirrors” approaches to public budgeting that rely on things like questionable savings from ambiguous efficiencies, or specious increases in projected revenue growth, weren’t going to fly either.
In fact, the data made it clear that any realistic approach to eliminating a deficit of that size had to include some new revenue.
So, in addition to saving over $317 million by, among other things, reducing Chicago’s payroll by 446 jobs, continuing a hiring freeze for nonessential positions, selling off city assets and reducing the amount of the proposed advance pension payment, Johnson put around $607 million in tax increases on the table. And got pilloried for it.
The Illinois Chamber of Commerce’s reaction typified criticisms of the suggested tax increases. The chamber took particular exception to proposals to generate $100 million by reinstituting a head tax of $21 on workers at large corporations with over 100 employees; $334 million by increasing the cloud computing tax from 11% to 14%; and $31 million by instituting a first-ever social media tax on large providers like Facebook and X. The chamber urged City Council members to reject those tax increases, and instead work with the chamber on “identifying efficiencies, applying reasonable cost controls, and advancing pro-growth policies.”
Did you notice the chamber didn’t mention working collaboratively to identify any new revenue? Just cuts to unspecified services. Which were probably left unspecified intentionally — given they’d have to be made to police and fire protection, streets and sanitation services, and social services that support the neediest in society.
And so it goes with most of the criticisms, which rip their constituency’s least favorite tax increases and offer to help find “savings” or “efficiencies” that are unspecified.
Platitudes about unspecified savings don’t balance actual budgets and won’t fund services sustainably over time. Recurring tax revenue, however, will. And while there are certainly rational questions about controversial proposals like the head tax, to be credible, any suggestion to eliminate a proposed tax increase has to identify new revenue from another source to replace it.
That’s because the data makes it clear Chicago’s ongoing fiscal difficulties exist in large part because the city’s long-term revenue growth isn’t sufficient to fund both the inflationary increase in the cost of providing public services from year to year and the city’s debt obligations.
That’s technically called a “structural deficit,” and in Chicago’s case it cannot be resolved without new revenue — or drastically cutting core services.
Stay away from draconian cuts
Given Chicago already has a substantial shortage of sworn police officers, estimated at anywhere from 1,300 to 2,000 positions, and significant unmet need for social services and mental health supports, draconian service cuts aren’t in the public interest and won’t make Chicago a more attractive place to live and work.
Are there legitimate criticisms of the 2026 budget proposal? Of course, there are. For instance, reducing the advance payment the city makes into its pension systems from $240 million to $120.2 million is troubling, given both the outsized $33.9 billion unfunded liability Chicago owes, as well as the increase in pension costs just foisted on the city by Springfield’s decision to increase benefits — but assume none of the costs associated therewith.
It’s also problematic the proposal relies on so much one-time revenue and debt issuances to plug the deficit. For instance, the proposal to declare a record TIF surplus of $1.02 billion generates $232.6 million for FY 2026 that won’t be available in FY 2027.
Indeed, the proposed TIF surplus is substantial enough that it provides Chicago Public Schools with the fiscal capacity to reimburse the city for $140 million of the disputed $175 million pension payment that’s vexed both Chicago and CPS decision makers over the last few years. But that’s also a one-time fix that has to be replaced in subsequent years.
Then there’s the plan to incur $185 million in debt to cover retroactive raises Chicago owes to some 4,800 firefighters, and another $90 million for 176 lawsuits filed in connection with disgraced former Chicago Police Sgt. Ronald Watts. Using debt and one-time revenue to cover operational needs isn’t sustainable.
That said, the mayor identified concrete proposals to close a $1.2 billion hole. Any legitimate criticism thereof must counter those proposals with specific, detailed alternatives. Chicago’s fiscal challenges can’t be solved with smoke, mirrors or platitudes.
Ralph Martire is executive director of the Center for Tax and Budget Accountability, a nonpartisan fiscal policy think tank, and the Arthur Rubloff professor of public policy at Roosevelt University.