Mayor Brandon Johnson’s strategy for digging Chicago out of its $1.1 billion financial hole has, so far, been more like a wing and a prayer.
He has talked about progressive revenue, but it’s been all talk and no action on the $800 million in tax increases he pledged during the campaign to impose on businesses and wealthy Chicagoans.
He has talked about extending the state sales tax to services. But he has yet to make a specific request for a change that can only be made by the Illinois General Assembly and Gov. JB Pritzker, with whom Johnson has a tense relationship.
The only progressive tax action Johnson tried to take — to raise the real estate transfer tax on high-end property transactions — was rejected by Chicago voters after a campaign bankrolled by real estate interests.
Johnson was hoping the Chicago Public Schools would reimburse the city for a $175 million pension payment for non-teaching school employees. But that hasn’t happened either, forcing the city to close the books on 2024 with a $161 million deficit.
Now the moment of financial truth is upon Chicago.
One year after breaking his promise to hold the line on property taxes, only to have an emboldened City Council oppose him, the mayor must find a way to erase a $1.12 billion budget shortfall.
“This is the budget that will define the mayor’s first term,” said Civic Federation President Joe Ferguson.
Well aware of those high stakes, Johnson is finally talking specifics about progressive revenue.
Reinstating the $4-a-month-per-employee head tax, lump-sum payments in lieu of taxes for hospitals, churches and other non-profits exempt from paying property taxes, taxing digital advertising and a corporate income tax are all “options” on the table, the mayor said Tuesday. He acknowledged that the there is “still some ambiguity” about whether or not a corporate income tax would require legislative approval.
Johnson made no apologies for waiting past the mid-term benchmark to pursue the $800 million in progressive revenues he campaigned on imposing to bankroll his “investments in people.”
“Some people can keep up with the pace and others, you have to bring them along. So now, we’re in a position where people are very clear about the deficit that we projected two years ago,” the mayor said.
“I just hope that City Council recognizes the unique moment that we’re in…to do something that has not been done before. It is to address structural deficits and do it in a progressive way.”
Johnson said he’s not at all concerned about millionaires and billionaires leaving Chicago to avoid paying taxes. When he talks to the titans of business, the only concern he says they raise is crime.
Ferguson, the city’s former inspector general, contends that Johnson should have been “more proactive in meeting the moment we knew was coming” when $1.9 billion in federal pandemic relief funds dried up.
Ralph Martire, executive director of the Center for Tax and Budget Accountability, serves on the working group tasked with producing preliminary findings by Aug. 31 and a final report to the mayor next spring.
Like predecessors Lori Lightfoot and Rahm Emanuel, Martire said Johnson inherited structural problems created by Richard M. Daley.
Chicago’s longest-serving mayor “refused to keep the property tax current, even with inflation” and made matters worse by “selling off revenue-generating assets like the Skyway and the parking meters for one-time bumps that he built into the operating budget, creating fiscal cliffs,” Martire said.
The best Martire could say about Johnson’s financial stewardship of Chicago is that it has “not been terrible” or marred by over-spending.
“What he has not been able to accomplish thus far is major changes on the revenue side. But he can’t do that by fiat…That’s the politics of revenue,” he said.
Martire said the only major adjustment to Chicago’s revenue structure in recent memory occurred when Emanuel muscled a $541 million property tax increase through the City Council.
“It took him three years to build the case for that,” Martire said.
Last week, Johnson appeared to box himself in politically.
Days after his Chief Financial Officer Jill Jaworski told Bloomberg that Johnson’s 2026 budget would almost certainly include a property tax increase, the mayor pulled the rug out from under her.
He ruled out a property tax increase that would have been even tougher to pass with just over a year to go before the 2027 city election, and slammed the door on layoffs or furlough days that risk alienating the labor unions that put him in office.
Ald. Pat Dowell (3rd), who chairs the City Council’s Finance Committee, said Johnson “should have maintained” — and needs to reinstate — the automatic escalator that Lightfoot put in place tying property taxes to the rate of inflation.
“That’s a real option again for this upcoming budget season,” she said.
Dowell warned the mayor not to “come to us without efficiencies and reforms in place.” Asked whether that can be accomplished without layoffs or furlough days, she said, “I am not sure about that.”
While the overall grade on Johnson’s financial report is “incomplete,” his first-half performance on specific subjects warrants a closer look:
The pension problem
Johnson’s first two budgets maintained Lightfoot’s pension advance above and beyond the state mandated payment. But the working group he created to study the pension crisis has yet to produce any ideas to solve it. The city’s overall pension liability has decreased slightly over the last year — to $35.8 billion — thanks to the booming stock market.
But a pension sweetener sitting on Pritzker’s desk threatens to saddle beleaguered Chicago taxpayers with $60 million more in annual pension costs and top out at about $750 million over time. The bill would boost pensions and annual cost-of-living increases for so-called Tier 2 police officers and firefighters hired in 2011 or later. Ferguson said this is “not the moment to add to already daunting burdens that are straining the city’s finances.”
“It needs to be declared as a luxury that we simply can’t afford right now, and that has to come from the mayor,” Ferguson said. “It has to come publicly so that the governor understands that the city itself does not want this…That’s the all the governor probably wants and needs to say, `Not this time.’ “
The borrowing black hole
Chicago has more debt per capita than any big city in the nation — and Johnson has added to the pile. His $1.25 billion bond issue for housing and economic development projects was tailor-made to wean the city off its historic dependence on tax-increment-financing (TIF).
He struggled to pass his $830 million general obligation bond issue for infrastructure, housing and economic development because it featured a back-loaded repayment schedule that raised the overall price tag to $2 billion. Wall Street rating agencies have cited Chicago’s historic addiction to debt as one of several factors contributing to their decision to drop the bond rating that determines city borrowing costs.
“Working families can’t structure a mortgage like we’ve been structuring our bond deals. The city shouldn’t be doing that either,” said Ald. Bill Conway (34th), Finance Committee vice chair. “The housing bond, the fact that we don’t have any oversight over grants less than $5 million, was shortsighted by City Council to give.”
Ferguson branded the back-loaded $830 million bond issue a “softer version of scoop and toss” that saddles future generations with debt. He noted that pensions and long-term debt together account for 40% of the city’s net operating expenditures.
“That’s a taxing issue. It’s also a crowding-out issue for the very types of policies and programs that he would like to prioritize,” Ferguson said.
Budget Director Annette Guzman countered that borrowing is only a bad idea if there is “no plan to pay it back.” She said the $1.25 billion housing and economic development bond is fully supported by expiring TIFs.
“Those dollars are coming back to the city every single year at increasing levels as the TIFs expire. That is a sound plan. That is good financial stewardship,” she said.
The labor conflict
As a former middle-school teacher-turned paid organizer for the Chicago Teachers Union, Johnson was uniquely positioned as, what Ferguson called a “brother of the movement,” to “call labor together to have the hard conversations” that the city’s financial crisis demands.
His reluctance to do so — even by demanding work-rule changes that reduce the city workforce by attrition — is a missed opportunity, Ferguson said.
“You avoid layoffs through furloughs. You get to furloughs by actually convening labor to understand, `This is where we are’ and the consequences are going to have to be layoffs if we do not have collaboration on the furlough front,’ ” Ferguson said.
Guzman insisted that top mayoral aides are “constantly in conversation” with city unions about “ways to make our expenditures more in line with our revenue growth.” Asked what Johnson has to show for those conversations, Guzman said, “These are complex issues that take time.”
Early on, Johnson managed to ease tensions with a Fraternal Order of Police that campaigned against him by extending the police contract and doubling the pay raise that Lightfoot negotiated for rank-and-file officers.
But Chicago firefighters and paramedics have waited four years for a new contract and the pay raise that comes with it because Johnson is trying to reshape the Chicago Fire Department to handle emergency medical assistance demands that comprise two-thirds of all calls for service. The contract is now in the hands of an independent arbitrator, an award that will saddle Chicago taxpayers with a massive burden for retroactive pay.
A troubling track record in Springfield
If Johnson deserves a failing grade in any specific subject impacting Chicago finances, this is it. Ferguson described the mayor’s record as “staged public demands with no behind-the-scenes conversation” to back it up.
The rookie mayor has struggled to build a strong list of accomplishments in Springfield, beyond convincing Illinois Senate President Don Harmon not to call for a vote a bill that would have extended a moratorium on public school closings and shielded Chicago’s selective enrollment, magnet and charter schools from major changes.
After a recent clash between Pritzker and Johnson over the governor’s stalled hemp regulations initiative, Pritzker complained that the mayor and his team “don’t have good relationships in Springfield, in part, because they don’t do the outreach that’s necessary.”
After naming former Northwest Side Ald. John Arena (45th) as his Springfield lobbyist, Johnson came out of a spring session dominated by the state’s budget crisis with no solution to Chicago’s education and mass transit funding crises, and only one major accomplishment: blocking the Bears from securing the tax certainty they need to move to Arlington Heights.
Until Johnson’s Springfield losing streak is reversed, Chicago will have little choice but to lean heavily on tax-increment-financing surpluses and other one-time revenues.
“This mayor is dealing with a number of pressures that were created — not by him, but by past administrations that oversaw the disinvestment of our pension funds, the brutality of a prior police department that’s now landing on our lap with exponential sums of settlements and judgments,” Guzman said.
“He’s also dealing,” Guzman added, “with the threats coming from the federal government of cuts to essential safety net programs which communities of extreme disinvestment rely upon.”