Down to the wire with the 2026 Chicago City Budget

There is probably no more challenging job in local government in the US than being mayor of Chicago who faces the challenge of handling a myriad of diverse racial, ethnic and economic groups all vying for attention and parity: but, pleasing only some of the people some of the time.

Perhaps the worst part of the job has to be the crafting of the annual city budget, one definitely designed to leave some winners and losers crying foul with mail drops of negative flyers, dive bombing of email inboxes on why nothing proposed will ever work, cue the devil in the details coming to the fore waving his pitchfork, followed by the opening of the doomsday book; and, Mayor Brandon Johnson has found out the hard way when months ago he gathered his advisors to handle a $1.2 billion shortfall, hamstrung by the usual culprits: increased health care costs for city workers, police and fire pensions, mandatory contributions, the dearth of COVID era federal monies and Trump era cuts.

For his critics, and there are many, the worst idea was the so-called “head tax" that by definition places a tax per employee on workers of a certain size at a predetermined amount. And while Chicago has had one in the past, under Mayor Rahm Emanuel in 2014, who quickly dropped it; but, for Johnson, as opposition grew he revised it to $33-per-employee to companies with 500 employees, 175 corporations instead of 1,000, but the mayor still faced brickbats, and critics labeled it a job killer and predicted that major corporations would leave the city in droves.

The monies received would act as a "public safety” to help tackle the many challenges of public safety across the city; and, while car jacking have lessened from two years ago, there are still enough robberies, muggings and beatings to warrant such an effort plus the steady uptick of crime on the city’s El trains, mostly occurring on the Red line, but there was also the recent burning of a woman on the Blue Line.

Johnson stressed that, ".0008 percent could literally create thousands of opportunities for people to drive violence down. I cannot think of a better investment that our city can make than in investing in the things that keep people safe."

In an attempt to pass the plan as a progressive standard, the mayor said it was also a much needed cry to tax the wealthy and have them pay their fair share, a sentiment not unfamiliar over the last decade that echoed across both the liberal and progressive political spectrum.

Others felt differently, the Illinois Restaurant Association tagged it a job killer, even Gov. JB Pritzker was opposed,but there is a long history, and WBEZ took to the stacks to give us some background: “For as long as it’s been alive, Chicago’s employer head tax has been derided — in one colorful way or another — as a job killer.”

“It’s much more than a head tax… it’s a scalping tax,” said the late Ald. John Hoellen (47th) in an hour-long debate four days before Christmas in 1973 when the council approved the policy.

A decade later, even progressive former Mayor Harold Washington said he wanted to reduce and then nix the disfavored tax — requiring companies to pay $4 per month for each person they employ — “in order to stimulate economic growth,” though he never did.

In 2011, when the City Council voted to slash and repeal the policy by 2014, former Mayor Rahm Emanuel applauded Council members and declared, “The head tax is a job killer.”

“Fifty-two years after its inception, those talking points have endured as Mayor Brandon Johnson’s attempt to revive a version of the hated head tax — at $33 a month for employees at companies with 500 or more workers — faces staunch opposition from a group of City Council members sensitive to the concerns of Chicago’s business community.

But the actual effect of the head tax on employment is unclear.” [an] “analysis of city tax data and publicly available economic data, reviewed by four economic and labor experts, found a lack of evidence that Chicago’s previous head tax, or its repeal, is to blame for job loss or growth in Chicago.”

“It really is hard to assign any kind of causation to the head tax,” said Audrey Guo, an economics professor at the Santa Clara University’s Leavey School of Business, who has written two leading research papers on the impact of payroll taxes on employers.”

Ralph Martire, the executive director of the Center for Tax and Budget Accountability told WBEZ,“The city of Chicago has more to offer for business in a business location than suburban Cook does, generally speaking,” he said, pointing to Chicago’s post-pandemic recovery that also has appeared to outpace the suburbs.”

In agreement, “Civic Federation President Joe Ferguson said he, too, has not seen compelling evidence that would constitute calling the head tax a job killer:

Since the city does not keep tabs on how many businesses are in the city with 500 plus employees, their conclusions are at best, estimates.

One very important note, well over forty years ago the then Mayor Richard J. Daley could not wean himself off all of the revenue that supported essential city services such as fire police, sanitation,etc,

Income inequality, the previous concern two decades ago, has now morphed into affordability; and, addressed most recently in the New York mayoral election by candidate Zohran Mandami, now mayor elect, is a key point for any discussion of head taxes, with the effect most keenly felt on those making well below the $100,000 threshold.

Johnson, a former Chicago Teachers Union organizer, and teacher, who had the backing of the CTU to gain office, has continued to hold their support, and in part they issued this statement: 

“Seventy-one percent of Chicagoans support taxing large corporations instead of raising fees on working families, and 74 percent say they’re less likely to vote for an alder who raises fees on residents instead of taxing corporations,” the CTU said.

Within that vein, in a move that many City Hall observers called unprecedented, CBS News Chicago reported last week that “The City Council approved a $16.6 billion spending plan opposed by the mayor last week; with a 29-19 vote to approve the tax revenue package to fund it on Friday and a 30-18 vote to approve the rest of the budget on Saturday.”

“In lieu of the controversial corporate head tax backed by the mayor, his opponents' budget will rely on an increase in the city's plastic bag tax; overhauling the tax on off-premise liquor sales; legalizing video gambling terminals in Chicago; and opening up new advertising opportunities, such as naming rights for bridge houses along the Chicago River, selling banners on light poles, and placing ads on city vehicles.

It also proposes bringing in nearly $90 million from selling some debt owed to the city for unpaid fines and fees, including parking tickets, ambulance fees, and water bills.

In a bid to limit the impact of that debt collection on the city's poorest residents, Johnson signed an executive order prohibiting the city from selling individual city-administered medical debt, such as ambulance fees, and establishing rules for selling debt owed to the city.”

Simply put, the alternative package from the opposing alders is based on regressive taxes and those taxes put the burden firmly on lower income residents. And, with that in mind the mayor will not sign the legislation, nor will he veto it, avoiding a potential onslaught of a city government shutdown but called it “morally bankrupt” despite the fact that it retains 98 percent of what he wanted, and when asked by local media why he won’t sign it, he said,”“Because there are some elements of this budget that, quite frankly, I don’t want to give a signal to the people of Chicago that I support what I believe is one of the most detrimental and immoral aspects of this budget,” 

Not all alders were on board with this budget and one of the most prominent is Alr. Maria Hadden (49th-D) who said in her December newsletter, “It has been hard to cut through all the noise surrounding the 2026 budget negotiation process.  In short, I have grave concerns that the alternative budget proposal is balanced on the backs of working Chicagoans, relies too heavily on speculative numbers and assumptions, will create a mid-year shortfall, and that the process surrounding the alternative budget proposal lacked transparency and basic principles of good governance.”

Regressive taxes, as Investopedia notes, are “Unlike a progressive tax system where tax rates increase with income, regressive taxes like sales, excise, and payroll taxes affect everyone equally but take a larger portion from those who earn less.”

Racing to meet the end of December deadline she noted that the process seemed rushed was also a significant factor along with a lack of transparency and said, “I can’t support a process that I find opaque and rushed. I also cannot accept a process that circumvents scrutiny. Chicagoans deserved better, and I hope this can be a lesson for all in future budget negotiations.”

Saving Grace: new proposed Chicago Schools budget

It was back to school on Monday for Chicago Public School students and controversy has been brewing for the last several weeks in the nation’s fourth largest school system over how to handle a deficit of $734 million and facing new funding challenges on both the federal and local revenue streams; and interim CEO Macqueline King has seemingly done the impossible: crafting a proposed budget that has no classroom cuts, and done so with a combination of debt refinancing, taking custodial services from contractors to in-house governance, central office cuts, a hiring freeze and new revenue including a city based fund surplus from a neighborhood tax incentive program.

In another city, and at another time, King would have been praised but in Chicago with its long history of racial segregation, its love of bare knuckle politics, is not enough for the critics, who are conservatives for the most, who in part have picked and pulled at the proposals, (due for approval by the school board at the end of the month), and they have hammered away at King’s good intentions.

Part of that hellish road is the lack of political will by many in the local leadership community, and state legislatures to tackle the complexities of a large urban school system that is dominated by low income Black and Brown students whose communities have faced historic disinvestment as well as the challenges of harnessing talents to creatively tackle the problems that lie well outside the classroom walls.

In 2018 Chicago schools created a new evidence-based funding formula to define adequate levels of funding to reach established levels and the money to reach those goals using “a minimum ratio of students to core teachers counselors and other central staff, “ according to Chalkbeat Chicago.

Using that formula, CPS needs an additional $1.6 million more to fill a gap of $400 million, much more than what was received last year, and to note not only is Chicago eligible for that amount but also 300 hundred other statewide underfunded districts. 

The good news is that CPS is getting an additional $76 million more as it reaches Tier 1 funding, but, as stated, it is far from adequate, despite it being more than previously thought due to lowered tax revenue and a large increase in English learners.

Reaction has been cautious: “That increase will help schools and students but unfortunately does not keep pace with inflation, the rising costs of operating our schools, addressing capital needs, and proudly serving a greater percentage of students who require more services and programming,” said Mary Fergus, spokesperson for Chicago Public Schools also to Chalkbeat Chicago.

In addition using the same metrics all schools are to be funded at 90 percent adequacy by 2027 but according to WBEZ reporting, the Center on Tax and Budget accountability, “it will take until at least 2034 to reach that level.”

Things came to a head in the last mayoral election with a run from a former social services teacher and organizer from the powerful Chicago Teachers Union, who won the mayoral race, Brandon Johnson, who ran on a progressive ticket and ushered in a new era of Chicago politics coupled with a strong interest in regenerating the public schools.

 

Johnson’s background, however, and his desire to improve the schools along a new path has been met with derision from some, and his earlier efforts to secure a high interest loan from former CEO Pedro Martinez led to a bruising battle of words, and threats, and as city leaders wrung their hands, or gleefully warmed to the ensuing battle, many felt that this was just not just about Johnson, but also for his political agenda.

 

A 26 percent approval rating for the mayor, has further made his handling of the schools, along with the city budget and safety issues a referendum against him, as well as enmity towards the CTU. And in a recent meeting with Illinois state lawmakers Democrat State Rep. Curtis Tarfer said of Johnson, “Part of the reason we are where we are is because of the ineffectiveness and sometimes ineptitude of the fifth floor,” referring to the mayor’s City Hall office.

Among the critics is former mayoral rival Paul Vallas in the 2023 mayoral election, and a former CEO of Chicago Public Schools, who in an editorial in the Chicago Tribune said that while King’s plan was good it did not say enough about the financial future of the schools. “It disappointingly avoids structural fixes - guaranteeing Chicago will face a similar budget crisis next year, The plan clearly elevates CTU priorities above student needs.”

Or, does it? Many in the media and across the city expected her to fully embrace, and be a rubber stamp of Johnson, but she hasn’t; and, in one key area she has also sidestepped a high interest loan to help CPS in her proposal, a factor that most believe brought down Martinez.

One sticking point is the $379 million payout payment plan that the district needs to pay to help cover the $175 million pension; and, the District wants the city to pay, fearing that if they don’t get the Tax Increment Financing money, there is an increased risk of a financial cliff, and as WBEZ reported:

“We are telling the city up front that we’re not going to pay this year, but we expect you to give us the money,” board member Emma Lozano said during Wednesday’s board meeting. “I think that we’re dreaming here. That’s not the way things work. And I’m hoping that there is another budget report that’s going to add the payment because I don’t see how this is going to work.”

Going back to the previous incarnation some members of the board are “demanding the school district’s budget include a controversial $175 million municipal pension payment,” in reality a reimbursement to the city.

It’s important to keep in mind that current debt servicing fees are at a hefty $1.06 billion per year and the TIF money cannot be guaranteed with city budget challenges.

This is tough sledding and the resulting donnybrook resulted in a letter from those board members to King further complicated matters in what, for the most part, was a well engineered plan to avoid dreaded classroom cuts.

Included in the demand is that any loan options “should be included as an option to be utilized only in the event it is necessary to avoid further cuts to the classroom.”

“The budget proposal reflects a total of $272 million in cuts, including to the district’s central office staff as well as custodial services, crossing guards, cafeteria staff, and more. Before Wednesday’s board meeting, SEIU Local 1, the union that represents some district custodians, held a protest against job cuts affecting its members. Custodians held mops and chanted “Keep schools clean” in front of district headquarters and decried the cuts, which they said blindsided their union and will result in dirtier school buildings.”  

On the other hand, the balancing act that brought this proposal has some key elements to help students increased money for special education students of $62 million and $7 million for bilingual services, and increased staff for principal, assistant principals, clerks and counselors, among other staffers; and, especially notable is a program to bring students back to school who have been absent for 12 to 18 months and the supportive services they may need. And, in all things considered the result is an $8.43 billion dollar operating budget.

Taking things further afield, Chalkbeat also reported, “At the Wednesday meeting, the district’s chief budget officer Mike Sitkowski said the proposal was informed by input from residents who urged the district to protect classroom instruction, resist more high-cost borrowing for operating costs, and forego the city pension reimbursement. The district is taking on $2.4 billion in new long-term debt to pay for maintenance of its aging school buildings. The new budget proposal includes $556 million in capital expenses.”

That, in and of itself, is a boon to an aging physical plant, despite the debt, and some residents remember when former Gov. Bruce Rauner, a Republican, described many Chicago schools as “crumbling prisons.”

While Vallas and others deride King for not planning for future deficiencies some say dealing with the present reality is fairer to students to not only continue the fiscal reality, but to try and tackle weakened test scores, despite improvements,

The mixed reaction from board members and others suggests that the heavy lifting is not over and the weeks ahead are going to be burdensome.

Can Fact Finder report bring CTU and CPS to a contract?

It’s been nearly a year since the Chicago Teachers Union began negotiations on a new contract, with the old one ending last April, and now there are current requests for higher pay, less restrictive evaluations, and money for more librarians and counselors has not gone unheeded but face budgetary concerns; but, these have been accompanied by dramatic moments, notably the firing of the Chicago Public Schools CEO, Pedro Martinez, and history in the making with the inclusion of the city’s first elected school board members.

The reactions have been varied and have resulted in widespread criticism from former school officials, conservative voices that have aligned themselves against not only the union, one of the most powerful in the country, but also against Mayor Brandon Johnson himself, a former school teacher, and official; and, whose union support helped propel him to office.

In a city where bare knuckled political battles are the norm, it seems that the CTU is in the eye of the storm, with each day bringing blaring headlines and egregious statements, sometimes cagy, and frequently predicting hell and damnation to the other side.

Chicago has the nation's third largest school system, just behind New York and Los Angeles, and for years has been plagued by a tax based funding formula that pitted the haves against the have nots, and has a student population of nearly half Black and half Hispanic student, who mostly have not had the politically backing of local, and even state officials; and, whose classrooms have been swelled by the arrival of immigrant students, many of whom were bussed, with their families, from the Southern Border by Texas Gov. Greg Abbott, a move that was seen by many as a prime example of political gamesmanship.

This has left many teachers, and most administrators, trying to cope with students who have not been in school in months, as their families struggled under dangerous conditions to escape political corruption, and gang violence to the United States; with the challenges of learning a new language and a new country, where often the teachers do not speak that language, most often Spanish; all of which adds to an existing population of students who are not infrequently low income, but often homeless. 

Framed this way, it’s not hard to see why teachers want, and need, more money, plus more resources, plus a more balanced evaluation system that reflects that not all of the work takes place in the classroom.

With the fiscal burden facing not only the city, with its pension funding challenges, there is the fundamental problem of creating a stable school system that faces these and many other issues, to create a strong corps of future employees, in an ever changing, world that demands much from its workforce, than in previous eras.

Enter Pedro Martinez, Chicago raised, and a veteran administrator, whose return to Chicago was a homecoming,and while he has the experience, checkered, say his critics; but, his leadership of this often troubled system had brought him to the unwelcome task of telling Johnson that he did not want to take out a high priced loan to shore up the financial demands of the union; and, in turn this led to some very public spats with not only the mayor but the CTU President Stacy Gates that led to his eventual firing, and a host of subsequent legal battles that kept him as lead negotiator in the battle for the new contract.

After a state mandated factfinder was brought in, much to the surprise of Gates, and Martinez, he agreed with many points from each side, and not only this widespread agreement, but sided with CPS in stating that a 4% pay increase during the first year was tenable and later inching up to 4.5% in subsequent years, reaching a compromise of sorts, and agreeing with the need for 90 new librarians by 2029, and more family engagement coordinators to help with the diverse needs of student families.

Matt Malin, the factfinder, had his work cut out for him, but even the union’s lawyer Latoya Kimbrough agreed that this was one of the best reports since the 2010 law, saying, "Without a doubt The best fact finding report the partners received since it became a part of the law.”

It’s no secret that President Trump wants to abolish the US Dept. of Education, and specifically has said that his goal is “ending radical indoctrination” in American schools, and the rejection of the report, can take all parties back to the drawing board, but also run the real risk of punitive measures from the new administration, and that could result in the loss of much needed revenue for not only low income students, but those with special needs as well.

Martinez has said that he feels the report was, “a very thoughtful and thorough analysis,” and Miguel Perreta, the district lead coordinator, has said, "overall, the report highlights how close we are at bargaining.”

Gates has given support, of sorts, by noting that there is no agreement on everything, but that it is a step forward, and was quoted in the local media as being “dumbfounded" with its largely favorable agreements with union demands.

Both sides have  a 30 day clock, or countdown, and the CTU would be able to notify the district of a 10 day strike notice, which as we’ve seen, might prove an opening for the Trump administration to intervene; and, from what has come down

from the administration, with its myriad of executive orders, that would not be welcomed by either side.

Chicago School CEO Pedro Martinez is fired

In a not unexpected move this Friday the Chicago School Board fired School CEO Pedro Martinez, in a closed executive session, after members of the public both praised and panned him, citing a failure of leadership, but without specific charges; and, most importantly lawyers for Martinez filed a temporary restraining order, that was too late to prevent such a move.

Well known among residents was the reason: Martinez’s failure to agree to a $300 million high interest loan to shore up teacher pensions and a pending contract, which put a target on his back by Mayor Brandon Johnson a former teacher and organizer for the powerful Chicago Teachers Union, and made him a figure of unofficial censure by many within, and without, the mayoral administration, as well as some teachers and principals.

Things had reached a fever pitch in recent weeks, and there has been a sea of rumors of when, if, and even how, Martinez could be fired, with or without cause. And, in the face of that, nearly one-third of local principals had expressed satisfaction with Martiniez and wrote the mayor a letter expressing support.

In an editorial from the Chicago Tribune the authors noted that, “More than 670 CPS principals and assistant principals — two-thirds of the 1,100 in the district — have signed a letter urging the current appointed board to retain Martinez in spite of the ongoing maneuvering by Johnson and his Chicago Teachers Union allies to remove the CEO and smooth the path to a new teachers contract that would cost an estimated $1.8 billion in the first year and more than $9.2 billion over the full agreement.”

In a prescient move, the Tribune noted: “A messy ouster, most likely accompanied by a payout to Martinez (unless the board can come up with some reason to fire him “for cause” since his contract is not up until July 1, 2026) is not in the best interests of the district. Martinez, at least, is attempting to keep taxpayers in mind by trying to hold the line on teacher contract demands that CPS has deemed “unaffordable,” claims the Tribune.

In the letter, it was noted that: “Pedro Martinez is our 9th CEO since 2009. ... Removing the CEO at this time means less guidance and support for principals and teachers until soon the lack of support hits the very people the system is built to serve — the more than 325,000 CPS students.”

“It is my hope the appointed school board will hold off any efforts for change in CPS leadership,” the principal continued, “until they take the time to speak directly to school leaders and hear how any decision to remove CEO Martinez will impact our ability to lead our schools.”

Do it for the kids is a popular tag line from past CEO battles and this seems to be true than, as it is now, and as the editorial board continued: “Johnson, for his part, won’t score any points with principals with this testy response when a reporter’s asked for his thoughts on the letter: “I actually don’t think much of it. ...Nope. I don’t think much of it at all.”

In an earlier attempt, The CPS Board offered Martinez a contract buyout.but local media reported that he had declined the offer.

"Pedro Martinez intends to honor his contract with the Chicago Public Schools and see that the 325,305 students and parents get the benefit of what they bargained with him," Martinez's attorney Bill Quinlan said.

And it was reported that, “According to Martinez's contract, the school board must find cause to fire Martinez.If not, it could lead to an expensive lawsuit,” just the result that we see going forward.

Coming on the heels of that effort, storm clouds were gathering when this was also reported: "We asked you, the board, to play a more active role in our negotiations because the CEO is supposed to be bargaining on the behalf of the board, and he is doing the opposite," Chicago Teachers Union financial secretary Maria Moreno said.

“In October, Martinez spoke to ABC7, responding to criticism that he has no CPS funding plan, and is relying on proposed cuts.He was also asked if he thought the mayor's picks for a new school board could end up firing him.”

"I don't know. I really don't. I'm being sincere," Martinez said. "I will say what's great right now is that, you know, it's very transparent what my contract says."

In what was an important development that led to Friday’s move, “The previous school board was not willing to fire Martinez or secure the short-term, high-interest loan to help pay for a new teachers contract, which led to a mass resignation in October.”

"I did not expect for this to escalate to the way it did," Martinez said at the time.

“Replacing Martinez is reaching new urgency for the mayor, his school board and their allies at the Chicago Teachers Union, who want to land a new collective bargaining agreement before mid-January, when a new 21-member partly elected school board takes over. The union has accused Martinez of being an obstacle to its demands. Just two weeks ago, the board instructed Martinez to settle the contract in the “coming days.”

“Martinez has defended his record at CPS, saying he helped shepherd the district through the latter stages of remote learning, then the return to classrooms and a subsequent nation-leading recovery in reading and math. He also has pointed to a revamp of the district’s school funding formula that activists, including the CTU, have long requested”

It has been widely noted by local media that “contract negotiations have proven to be a chief point of contention

“When the 21-member board takes office in January, with 10 members elected on Nov. 5 and another 11 appointed by the mayor, it might be harder to reach consensus on a CTU contract. Johnson’s handpicked board members are pushing hard to get a deal with the union now, but some elected board members will be opposed to the mayor and CTU.”

“Martinez and his team seem to be unwilling to meet many of the CTU’s demands, particularly around staffing, which they have said are far too expensive for the cash-strapped district that just faced a half-billion-dollar deficit this year. Martinez, like the mayor and CTU, has pushed for more state funding. But there’s no guarantee that comes through after they were rejected last spring and as the state faces its own financial difficulties,” according to both the Sun Times and WBEZ.

Chicago is the fourth largest school district in the nation, and has had decades of student population turnover, high and lows for test scores, and has faced competition from charter schools. It has also had less money due to a tax based system that often leaves it out in the cold, compared with wealthier suburban schools.

A large part of the challenges that it has also faced was with its predominantly Black and Brown population, and the lack of will by some white lawmakers to effectively fund and support it to meet growing modern day challenges has been a constant.

Martinez,a Chicago native, and graduate of CPS, confronted a maelstrom of discontent and dissatisfaction dealing with these, and would have not been able, under the best of circumstances, to turn the schools around to what the students both deserve, and need, after decades of neglect.

Former Governor Bruce Rauner likened the physical plant of many Chicago schools to “crumbling prisons,” and some, especially in the poorer sections of the West and South Sides of the city do fit that description, as painful as it sounds.

Added to student population mix are many homeless children who face outside pressures of where to sleep and eat, much less to find a place to do homework;and, then less than two years ago the district faced a wave of immigration, first promulgated by Texas governor Greg Abbott, who sent thousands to the city and whose parents, as much as their students faced the same problems of the local homeless population, with the added burden of a language barrier, where teachers often enlisted janitors to translate for Spanish speaking students.

Martinez as noted, is the latest of a series of school CEOs that have had mayoral backing, and then found disfavor as they tried to meet the myriad of issues that the system faced, and one, in particular Barbara Byrd Bennett who went to jail in a bribery investigation and “was sentenced to 4 ½ years at Federal Prison Camp,Alderson in West Virginia”; all of which has made most white parents send their children to private schools, either in the city, or suburbia, and has left the CTU and other educators to try and do the best that they can with limited resources. 

For many, the money spent per pupil, seems high, yet there are problems that money alone cannot solve, for example those homeless and migrant students arriving from South America, who in addition to the language barrier, had not been schooled for many months due to school closures in their native countries, and the violence they often faced, and the dangerous journey across the Darien Gap to reach the United States.

Now, halfway through the school year, these challenges will not go away, nor will Martinez whose contract has him remain in place for 180 days be able to turn around and make any substantial changes to counter his critics.

Floating around is a rumor that there will be an addition of a Co CEO or a reduction in Martinez’s duties, but this would be a direct violation of his contract, and would also expose the city to yet another costly lawsuit, and negative national publicity,which would be ripe for an intervention form the incoming Trump administration, and the undesired attention of Elon Musk.

“Moreno has blamed Martinez for dragging his feet to get a deal done. CTU is anxious to resolve the labor dispute before President-elect Donald Trump takes office. The union originally sent CPS over 700 contract demands, including a 9% raise,” according to recent reportage.

"CPS still doesn't know how to negotiate with its workers. We want to settle via negotiation, and we have provided a pathway to settlement," Moreno said.

With the incoming Trump administration, Chicago is already a target and previous trash talk about the city, its Democratic majority, violence and school issues by Trump has posited it for his attention.

Already in a recent visit to Chicago the newly, but not yet official Border Czar, Tom Homan, a Trump loyalist said to an approving crowd, that “Your mayor sucks,” and added Illinois Governor JB Pritzker to the same torrent of abuse.

Timing is everything and Johnson timed the firing, with what many have seen as a none too subtle push with his chosen board, before the newly elected school board members begin their term in January.

Chicago faces financial cliff with budget dilemma

City budgets across the United States are still recovering from the COVID pandemic and of the nation’s largest cities faces a seemingly uphill battle and that is Chicago, whose Mayor, Brandon Johnson, less than a year in office, faces not only the daunting task of filling a deficit of $1 billion, but also intense criticism of his handling of burgeoning crime, and balancing the budget of Chicago Public Schools, who face a deficit of $500 million, and in whose negotiations with his former employer, the Chicago Teachers Union, shadow his dissatisfaction with school CEO Pedro Martinez, who he faults for his refusal to sign off on a loan of over $300 million to stave off a the deficit.

“The latest budget crisis is playing out as the city faces one of the highest unemployment rates in the country, and its population is the lowest it’s been since 1920”, notes Illinois Policy, a right leaning think tank. And, without the revenue from the federal COVID relief package Chicago is facing a financial cliff.

“Between March 2021 and June 2024, Chicago spent more than $238.8 million on a host of programs including affordable housing, mental health, violence prevention, youth job programs and help for unhoused Chicagoans, according to the most recent reports filed with the U.S. Department of the Treasury as required by federal law, and, “That is approximately 44% of the $540 million Chicago officials set aside from the city’s $1.9 billion share of the federal relief package known as the American Rescue Plan Act, or ARPA,” in an October analysis by WTTW, the local NPR affiliate.

Johnson has said,” I saved the taxpayers over $220 million in last year’s budget, But the hard reality is that our expenses have outspent our revenue.”

To note, it has been reported that,  “The federal government spent over $800 billion to help states navigate the pandemic and government imposed economic shutdown,” and part of the well for Chicago will no longer be available, and statewide as a blue state, it’s hardly likely to receive additional monies from the incoming Trump admimstration.

Future Projections face special interests

Local media has also reported that “Baseline projections estimate the city’s budget will grow to $1.12 billion in 2026 and $1.32 billion in 2027, but those shortfalls could be as large as $1,58 billion and $1.93 billion. Chicago is projecting its 27th consecutive budget shortfall in upcoming years.”

Money may be the root of all evil says an old maxim, but managing a big city budget requires careful deliberations, and in Chicago facing off various groups, from the business community to low income and housing advocates is a tricky act; and, in a city with a long history of racial segregation, and disenfranchisement, it’s doubly hard to meet durable satisfaction with some of these groups. 

Equally important are those residents and local leaders who did not want another Black mayor after the battle-scarred administration of his predecessor, Lori Lightfoot.

Elected on a progressive agenda, Johnson has tried to center his decisions with that in mind but has strained relations with the business community who work from a different model.

Meanwhile many residents are taking a “bread and butter" stance towards finances, and often don’t have an understanding of when, and how, a progressive movement would benefit them.

During his mayoral campaign Johnson said that he would not propose a property tax to help balance the budget, and in a September press conference, he said, side stepping questions from reporters: "This is just a forecast," he said, "It's a moment in time, and so no decision will be made just based upon a forecasting. But what I will say is that I'm very much committed to our overall vision of investing in people."

Lately, in a recent media appearance the mayor emphasized that he is “going to continue to do what I was elected to do, which is to respond to decades-old processes and failures, by repairing the structural damage by actually paying into our pensions while making the critical investments that ultimately build a better, stronger, safer Chicago.”

Going Progressive and facing pension obligations

The latter is definitely a progressive stance, and the question of how he can meet that goal has become a central question of the overall city budget proposal; as well as that of the CPS budget, which contains a new, and costly, contract with the teacher's union.

CPS also is part of the mix, as noted earlier, and “While discussing the release of the forecast on a call with reporters, Johnson suggested he would continue to pressure Chicago Public Schools to assume approximately $175 million in pension payments for certain employees who participate in the city’s pension funds rather than the Chicago Teachers’ Pension Fund.”

Importantly, in recent reportage, we see the following: “The Chicago Board of Education did not include this in the $9.9 billion budget they approved last month. As the district faces its own budget shortfalls and is in the middle of negotiating the new CTU contract – which could add up to $13.9 billion in additional costs – it seems unlikely the district will bail out the city by taking on that pension expense.”

Outside of that, the four pension funds are as follows, per the Center for Tax and Budget Accountability: "The City of Chicago is responsible for funding the following four, defined benefit public pension plans: Laborers’ and Retirement Board Employees’ Annuity and Benefit Fund (“LABF”), Municipal Employee’s Annuity and Benefit Fund (“MEABF”), Policemen’s Annuity and Benefit Fund (“PABF”), and Firemen’s Annuity and Benefit Fund (“FABF”).”

“We really need to look at prioritizing our investments,” Christopher Taliaferro, an alderman from a ward on the west side of the city and a former police officer, said during a recent budget hearing. “It’s almost like buying caviar when you can only afford Spam. I love Spam but the problem is we are spending beyond our means.”

A smaller property tax on the table?

November’s proposal of a $300 million property tax should not have come as a total surprise to some, but as we have seen, for many lawmakers it was simply unacceptable, and the 50 alder people sitting on the city council rejected it by 50-0; and, now facing a looming deadline of December 3 there is much hand wringing, and some who feel that there must be some sort of a property tax increase needed.

All options are on the table, and ABC7 reported that taking a property tax off the table was unfeasible, said some, and "For us not to get that revenue from last year was a mistake, and it was politics involved in that. And so they're going to ask for a property tax increase. I'd be shocked if they don't," 17th Ward Alderman David Moore said.

City Hall observers have felt that the council’s rejection was a new dawning that it would not automatically rubber stamp a mayoral proposal, as had happened with previous mayors, Harold Washington excepting, who was fought tooth and nail by the White council members; and, that his supporters saw as a racist attempt; and, few of that era can forget the virulent opposition by Ald. Edward Vrdolyak to Washington in the infamous Council Wars.

That assertion might now be considered hyperbolic with a different person sitting in City Hall and the council containing a greater majority of Black elected officials and department heads, but present reality beckons.

Start with the booze

BNN Bloomberg reported that, “Now, they’re negotiating piecemeal items from higher levies on alcohol sales to cloud computing to garbage fees. The fight is putting the city’s credit rating at risk, with S&P Global Ratings warning that the likelihood of ending the year without a budget has increased.”

Protests against the alcohol tax, which is expected to fetch $10 million in needed revenue, were swift and immediate: "We already pay, among the hospitality industry, the highest beverage taxes in the whole Midwest and some of the highest in the country," Pat Doerr with the Hospitality Business Association of Chicago said. "City Hall's proposed tax increase would make us the second-highest taxes on the enjoyment of beer, wine and spirits in the whole country."

Yet there are some that feel this tax would only be a pinch, not a stab, and, “The mayor's plan to raise an additional $10 million from higher alcohol tax would amount to adding just pennies to a drink served at a bar, his administration says. The hospitality industry says it can't afford any new tax after feeling the pinch from the rise in labor costs this year because of the increase [wages] for tipped workers,” reported local affiliate, ABC7.

"We're evaluating all of the different tools in our toolbox, including looking at slowing down hiring, an outright hiring freeze, as well as reducing other non-discretionary spending, sorry, other discretionary spending that our departments have within the budgets," City Budget Director Annette Guzman has said.

Surplus money to the rescue?

One option being pursued is to raid the surplus money for $272 million that was saved from tax years 2022 and 2023, and that Lightfoot, signing an executive order, designated to be sent “to the city’s pension funds on top of the more than $2 billion statutory payment already in the budget,” recently reported by the Chicago Tribune.

That effort, if approved, would cost a whole set of new problems, kicking the can down the road for future years and endangering a downgrade in financial ratings that were boosted by Lightfoot’s actions, even though some say it was still short of what was needed.

The Center for Tax and Budget Accountability has said,” These four systems have the lowest funded ratios for local pension plans in the country. Considered together, in 2022 Chicago’s four systems had $44.7 billion in liabilities, but only $10.8 billion in assets to cover those liabilities. This means Chicago, and hence its taxpayers, face a significant, $33.9 billion, aggregate unfunded liability.”

Moving away from those extra funds into the pension system would come at a cost, said Amanda Kass an assistant professor in Depaul’s School of Public Service, to the Tribune, “The credit rating agencies look very favorably on the city putting extra money into the pension systems because it help shore up the system’s finances faster. A move away from that is potentially a negative for the finances of the pension systems.”

“Chicago is really in some serious trouble,” David Schleicher, a Yale Law School professor who focuses on state and local finances, said to BNN Bloomberg, "The city is “caught between the failure to address structural problems during Covid and broad unhappiness with the property tax.”

Both the known and the unknown have reached a tipping point and for Illinois Policy, “The standoff is shedding light on Chicago’s mountain of debt and pension liabilities, which make up nearly one-third of the city’s spending and limit its budget flexibility. Last week, S&P put the city on a negative credit watch with at least a one-in-two chance of a downgrade in the next 90 days.”

Options meet baseline shortfalls

They also noted that, “The positive outlook assumes waning inflation and reduced interest rates spur faster economic growth in tandem with slower growth in city expenditures. The negative outlook scenario assumes a short recession in 2025, increasing expenses and decreasing revenues, followed by a rebounding economy in 2026 and economic growth in 2027. The city’s 2025 budget shortfall was consistent with the baseline estimates produced last year, which assume declining inflation and interest rates accompanied by modest economic growth.”

"There are a number of options that, you know, we will explore. What we're working to safeguard against is harm to constituents, to everyday people," Johnson has said in response to such criticism.

Racial equity is very much on his mind when he added, "As much as we are faced with challenges, it has not disrupted my vision to invest in people and especially the West and South sides of Chicago." 

Significantly, it was also reported: “And though the city was able to close this year's previously projected deficit of $538 million, the revised forecast shows the city is still facing a $223 million deficit for the rest of this year. The cause is mainly blamed on the $175 million pension contribution due from Chicago Public Schools and a shortfall in corporate tax revenue.”

Pension holidays were taken before specifically by former Mayor Richard M Daley, whose raid of the coffers, in 2007 to prop up the Chicago Transit Authority, as one example, to prevent a fare increase met a new standard of fiscal management.

“The problem we have is for two decades the employer didn’t do their part,”  Chicago Teachers’ Pension Fund director Chuck Burbridge told WGN Investigates in a 2017 report; and “They skipped payments.”

“They were called “pension holidays” and they were orchestrated under the watch of former Mayor Richard M. Daley and passed by the Illinois legislature under Democrat and Republican governors.”

Gong back is not an option

“In order to close the projected annual budget gap, the city has often resorted to “scoop and toss” budgeting practices, such as refinancing and restructuring debts, which further delay and increase inevitable costs. It has also relied on one-time revenue sources, fund sweeps or other “efficiency and savings” measures to temporarily provide the resources needed to “balance” the current years’ budget, remembered Illinois Policy.

They also added cautiously, “These short-term solutions, while politically expedient, do little to rectify the underlying problem in the city budget: Chicago spends faster than it earns. As a result, the city has faced a projected budget deficit each year for well over two decades.”

Taking a look in the rearview mirror of time reveals both philosophical and pragmatic approaches, and as The Week reported in September, quoting Johnson who said to reporters, that "sacrifices will be made." 

Hard decisions are often the words heard from alders as they look at deficits and Johnson’s statements, as well, gives us a glimpse to what may be on the table, as well as what many see as an eventual lower property tax.

Homeowners are worried

But most importantly there are many homeowners who feel that their property assessments have already burdened them and are concerned about any tax increases.

According to the Cook County Treasurer, for this year the median property tax bill is $3,811, an increase from $3,285 five years ago.

Scouring the budget for cuts is bound to please some, and no one, but the effort has been made, and as reported, there are steps being taken and as the city's budget director, Annette Guzman, said in a statement:

“This includes a series of budgetary restrictions such as a "citywide hiring freeze and stringent limitations on non-essential travel and overtime expenditures outside of public safety operations." Guzman noted that the 2025 budget shortfall — expected to be $982.4 million — is "largely driven by rising personnel, pension and contractual costs, alongside ongoing revenue challenges."

Rephrasing Abraham Lincoln, the question remains, is that enough to please some of the people, most of the time? In an awkward attempt to quell the storm, Johnson caught in the crosshairs, insists, “I don’t want cuts, I don’t want layoffs,”

There are some efforts by nearby states that Chicago could emulate; and, The Week noted that “Chicago is not the first city to face these challenges and could take lessons from other cities in similar situations. In 2022, Milwaukee was "on the verge of financial collapse" with a massive deficit and "possible bankruptcy on the horizon," said consultancy EY-Parthenon. The city was "able to document the local actions it was exploring and could demonstrate to members of the Wisconsin Assembly the mayor was taking steps to fix the situation."

Milwaukee's "comparison with other cities and a methodical accounting of the cost-cutting initiatives the city government had already undertaken helped demonstrate to legislators, the business community and the public that the politically difficult decision to raise taxes was likely unavoidable," said EY-Parthenon. This could become a similar path as Chicago works to dig out from its own deficit.”

Aftermath: Budget approved

On Tuesday, Johnson scored a win, some might say a pyrrhic victory, when the Council passed his $17.1 billion budget by a narrow vote of 27 to 23, without a property tax increase, returning to his campaign promise of not raising them, but the victory does contain a variety of tax increases on everything from valet parking to streaming services and cloud computing, and also that dreaded bag tax, but critics have argued that this is a temporary fix and still risks a credit rating downgrade by national credit agencies, this making it fallout for the city to borrow money.

For land debt from the purchase of the old Michael Reese hospital, there is a $40 million settlement by spreading out payments to pay off remaining debt from that space, intended for the 2009 Olympics, that later was awarded to Rio, in what some have also criticized the mayor for, but this is to help satisfy the $91 million purchase price by former Mayor Richard M. Daley, and not an error from Johnson.

Critics, including many council members, notably Maria Hadden of the 49th Ward, have voiced their concern with a process that she called fractious and that many have said lacked transparency.

Andre Vasquez of the 40th Ward said that the budget is a “short term fix that is not financially responsible,” and Anthony Beale of the 9th Ward while pleased with the absence of the $300 million property tax said, “Since then we just miraculously, voila, went down to $150 million,” Beale said. “We went to $68 million. Now, miraculously, voila again, we go to zero. However, in order to get to zero we are “fining”and “feeing” Chicagoans to death.”

Local affiliate, NBC5 reported, “Ald. Bill Conway, who voted against the budget, said the city “can’t ask working families to pay more,” and that Johnson is risking serious issues by not considering additional spending cuts.

“There were additional efficiencies to consider but unfortunately, Mayor Johnson repeated some of the same mistakes of those before him by being unable to make hard choices and kicking the can down the road even further,” he said in a statement. “This budget process was characterized by unsuccessful sweeteners, unnecessary delays, and proposals that, as the Mayor put it, were just meant to ensure we were paying attention.”

Hadden had added, according to coverage from WTTW, that, “Johnson’s handling of the budget negotiations left the City Council “fractured” and made it harder for Chicagoans to trust their government at a perilous moment for the city as President-elect Donald Trump prepares to take office.”

“We are not prepared, and the fault lies squarely with you and your administration,” she said.

It seems that the very same problems that have plagued previous mayors have settled squarely on Johnson’s shoulders, but without the rubber stamping of those councils.

Updated December 19, 2024 at 2: 15 p.m. CDST