As many of you know, the City Council voted on Mayor Johnson’s 4th budget version this week and it did pass 27-23. I voted against this latest budget, which had not substantially improved on previous versions that included property tax hikes starting at $300 million, with no cuts or efficiencies. The final budget package was sent by the Mayor to Aldermen at 1:15 a.m. the morning of the vote for final approval.
This budget is not fiscally sound and will definitely exacerbate our financial problems for years to come. Despite losing on the vote, we will continue to point out the need for right sizing government while still providing a safety net for our residents and essential services for all. The City budget grew during the pandemic and into post Covid years, primarily due to federal funding that was temporary and slated to be reduced by now. The city budget grew by billions and added $3.6 billion in non-personnel costs, $748 million in personnel expenses, and over $1.6 billion in pension costs.
This budget was based on the Mayor making and retracting proposals at a record pace. One day it was $300 million in property tax, then $150 million, then $68 million. All of his proposals were devoid of substantial cuts and efficiencies to balance out our expenditures versus revenues. When the Council unanimously rejected his first property proposal, it was our opportunity to right-size the municipal government to 2020 pre-pandemic levels.
The Mayor instead doubled down defending budget items that were glaring problems and should be very simple cuts such as:
Removing the Vice Mayor position that pays Alderman Walter Burnett $432,000 for a ceremonial office that had never been funded in prior decades
Removing security personnel and vehicle funding from the Water Department budget for the City Treasurer, Clerk, and Chairmen on Council
Reduce the spending increases in City Council committees that have risen by millions over the past two years, with less to show for the increases
Reducing the Mayor’s budget - Johnson’s office budget skyrocketed up to $17 million from $10 million from previous administrations.
While we offered up over $800 million in possibilities to right size the budget, none of these simple measures were taken on, these included:
Reduce mid-level administrative bloat with supervisor and administrative jobs that create supervisory/employee ratios average around 1:3
Eliminate the Office of Public Safety Administration totaling $61.3 Million which in some ways is redundant in handling Police, Fire, and OEMC management issues
Maintaining youth employment program funding at current FY2024 levels
Eliminating $175 Million 2025 CTU non-teacher pension payment that the new CPS board should take on
Maintaining $300 Million in additional homeless/migrant mission spending
Eliminating or reducing Corporate Fund payments for Special Revenue Funds of about $230 million
The Mayor did cut the property tax back but made up for it by some shifting of funds including:
Foregoing $40 million loan payment for city owned Michael Reese Hospital site bought for the Olympics- but this will add at least $2.5 million more in interest payments on the $40 million.
$10 million in “cost recovery” for special events that need police, traffic, and other city services. This data was not available as of a few days ago and is an aggressive revenue assumption that rating agencies frown upon
$5 million in unspecified energy savings.
$8 million in public safety cuts, presumably by eliminating police vacancies
$2.8 million eliminating some vacant middle-management jobs in city departments
using millions from the recent refinance/borrowing for the budget gap, and borrowing for unsustainable operating expenses.
The Johnson budget includes these tax and fee hikes:
Personal property lease tax hike from 9% to 11% -$128 million
Amusement tax on live events/streaming services from 9% to 10.25% -$12.9 million
Parking garage tax increase to 23.35% on weekdays & 20% tax on weekends- $11.3 million
Rideshare trips tax- $8.1 million
Raising shopping bag fees from 7 to 10 cents -$5.2 million
Other fees and fines -$4.6 million
Other progressive cities have made significant cuts across the board realizing that their post-Covid pandemic funding levels are not sustainable. New employee positions ballooned during Covid and have no new funding mechanisms in place to sustain the temporary jobs, except through an increase to the corporate fund and future property tax increases.
While recognizing that inflation has played a part in some of the increases in both private and public sectors, there is an increase in the city budget that far outpaces inflation. Without structural changes, cuts, and efficiencies, the City continues down a fiscally irresponsible budget path that will more than likely lead to credit downgrades that cost taxpayers millions more than it should as the city borrows in the future. Credit rating agencies have already put the City of Chicago on a credit watch for a downgrade.
Mayor Johnson and everyone who voted for the budget are undoing years of fiscal and budgetary discipline that had led us to multiple positive credit ratings in the last term. Just last month, contrary to the comments by the Mayor’s staff, rating agencies were already projecting a downgrade to the City for failing on fiscal discipline.* All that work will be undone by the last couple years of fiscal and governing mayhem. We also must contend with the CPS financial distress and property tax reassessments that will require taxpayers to dig deeper.
Several aldermen formed different groups, demanding the Mayor and Council members work on getting Chicago’s budget right-sized before the financial oblivion hits. Different groups of Aldermen knew that we were not alone, that taxpayers, rating agencies, civic groups, and City Hall watch dogs were demanding the same.
Reducing spending may be a difficult task, but it is the only sustainable path forward. The Mayor believes all of his ever growing spending plans can be propped up by the State of Illinois simply giving us more and more money, or allowing us to have an income tax to be managed by the Johnson Administration.
Mayor Johnson and his team are setting up Chicagoans for another property tax showdown in 2026, 2027, and perhaps further down the road. The next mayor will be saddled with increasing debt and dysfunction. They will have a near impossible task that will include cutting jobs, cutting programs, and cutting our way out of a financial disaster that is in the making today. We only have so much borrowing capacity and we are pretty much maxed out.
It's not easy to figure out how all these numbers add up when amendments are thrown at you in the early morning hours before a $17 billion vote but it was indication enough that weeks of problems were still being compounded and the budget should not pass. Mayor Johnson's budget will create more inequities, and lead to divestment in all areas of our city over the next few years. Add in the new CPS contract and reassessments to this budget and we are in for a rough ride.
Contrary to the Mayor's rhetoric, there is no bailout coming from the federal government or from the state government. The bailout for Mayor Johnson’s budget is coming from Chicagoans. Any income tax proposal is years away, not next term, and should include property tax reform at the state level. I’ll continue the effort to get the City of Chicago fiscal shop in order with the resources we have and continue to stress City budgeting within our means. I appreciate all of the insight from residents and our business community throughout the last few weeks and years as we try to keep our City moving forward.
*Credit Rating Agencies notes “We believe that this budget could represent a critical juncture for the city’s credit trajectory, as failure to implement structural solutions to contain the deficit will only defer action on hard choices that are likely necessary to place the city’s finances on a sustainable footing,” S&P
Fitch Ratings -cautioned that “rating stability is predicated on Chicago’s ability and willingness to continue to adhere to sound fiscal practices.” “A reversion to its prior pattern of reliance on non-recurring solutions, aggressive revenue assumptions, and new recurring spending or revenue cuts without offsetting actions would trigger negative rating action.”