Last month, Mayor Brandon Johnson trumpeted the fact that Chicago faced only an $882 million budget shortfall in next year’s budget—a testament to the sad state of the city’s finances. Though they are smaller than last year’s shortfall, the city’s consistent deficits are a sign of deeper fiscal trouble.
Johnson’s nearly $18 billion budget proposal, which he unveiled last week, shows that the mayor doesn’t want to deviate from the progressive aspirations that put the city in its current situation. His budget is a collection of new taxes, new budgetary tricks, new spending plans, and new debt issuance. For a city already burdened by out-of-control spending and debt, this budget would drive Chicago further into risk of default.
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Despite the city’s progressive reputation, most Chicagoans are fed up with their taxes, the highest of any U.S. big city, according to a 2022 study. In his mayoral campaign, Johnson had to promise not to raise property taxes. He broke that promise almost immediately, but the city council rejected his plans. The council has also firmly rejected Johnson’s proposed head tax on employees, which the mayor nevertheless floated again in this year’s budget.
That tax is unlikely to clear the council, but other taxes Johnson has proposed might get through. He wants to increase further the “cloud tax,” which taxes, among other things, software subscriptions. One consulting group called the levy “unique to Chicago” in its scale and breadth. Johnson wants to increase it from 15 percent to 20 percent—ensuring that Chicago businesses will lag behind on technology adoption. He also wants to raise taxes on liquor, package delivery, and sports betting.
Johnson’s main trick to keep the city fiscally afloat throughout his tenure has been the use of “sweeps”—raids on funds from the city’s more than 100 improvement districts. So far, he has swept hundreds of millions into the budget this way. Ideally, that money would have been spent on actual infrastructure, property tax relief, or permanent reserves. Johnson proposes yet again to sweep in funds this year, despite having depleted such reserves in the past.
Perhaps Johnson’s most egregious proposal is to issue almost $500 million in bonds to pay for police-misconduct settlements. In practice, this will leave Chicagoans to pay off Johnson’s civil-rights attorney allies, who often profit from these settlements. Such bonds are usually used for city improvements. Previously, Johnson has used them for retroactive pay for firefighters.
Johnson’s big debt plans are made even more mystifying by the fact that he still hasn’t figured out how to pay for the current budget. The city hoped to sell nearly $1 billion in debt owed to Chicago to private debt collectors. Yet not a single firm was willing to make the deal. Chicago also tried to refinance older debt. But private firms, understanding the city’s sorry state, stayed away or demanded higher interest rates. Johnson’s team is still scrambling to secure funds for the next few months.
Instead of confronting these issues, Johnson in his budget address lobbed the familiar attacks at President Trump and claimed that the city’s economic problems are the result of “racism and redliners.” In fact, the city’s problems are the result of years of mismanagement.
Roughly 40 percent of Chicago’s local budget has been eaten up by debt and pension obligations in recent years. Ninety-three percent of all property-tax collections are dedicated to either pension or debt. The Reason Foundation has declared Chicago “the single most stressed major city in America” and “the epicenter of fiscal stress.” In the past two years, three ratings agencies downgraded Chicago’s debt, citing the constant budget shortfalls and budgetary tricks.
As Alderman Scott Waguespack said after Johnson’s budget proposal, “you can’t run a city government on ideology.” But Johnson has not allowed his position as one of the nation’s most unpopular mayors—his approval rating sits at just 22 percent—to dent his ideology. Nor has he been deterred from announcing his next mayoral campaign, even as only 14 percent of Chicagoans want him to run again.
Whoever succeeds him will unfortunately inherit his legacy: a city where ideology has led to ever more burdensome taxes and debt.