Mayor Brandon Johnson’s administration on Thursday unveiled a projected $882.4 million hole in the 2027 budget, officially starting the clock for another slugfest with aldermen over how to close the gap before the end of this year.
The mayor cast the predicament as all too predictable in a briefing with reporters in which he blamed historic fiscal mismanagement as well as his council opponents who stymied his progressive agenda.
“As we prepare to put forward our 2027 budget proposal in the coming weeks, we will learn from the lessons of 2026,” Johnson said. “My administration’s values have not changed. We will not balance this budget on the backs of working people.”
Johnson refused to outright reject hiking property taxes or laying off city workers in an election year to deal with the still-colossal shortfall, though he said he hopes to avoid either of those politically fraught options. He did commit to making the $364 million “advance” pension payment in 2027 — a continuation of a policy from Mayor Lori Lightfoot to help keep the city’s retiree funds from going underwater.
But above all, Johnson’s most emphatic demand this budget season is the same as it was last time, an idea strongly supported by his progressive base that he has roundly failed to implement since he took office: taxing the rich.
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“Collaboration is not just simply about acquiescing to someone’s demands,” Johnson said. “If there’s disagreement around balancing budgets off the backs of working people, then quite frankly … I think it’s going to be very difficult to avoid tensions there, because then now that is counter to my value system.”
It remains to be seen whether Johnson can bring that value system to bear on the 2027 spending plan, after opposition aldermen brushed aside his 2026 proposal’s corporate employee head tax, instead passing their own version of the budget for the first time in 40 years.
In the weeks to come, Johnson’s budget team must come up with a mix of cuts, efficiencies and fresh or expanded revenues that will prove palatable enough to 26 — or 25, if he’s open to casting a tiebreaker — members of the City Council.
The proposal, which he is set to present to aldermen next month, comes as Johnson and all 50 seats on the council are up for reelection in February, and the city already suffered from a pair of ratings agency downgrades earlier this year, driving up the cost to borrow and driving down confidence in the city’s creditworthiness.
After defying the conventional wisdom of ramming through unpopular budget measures like broad tax increases earlier rather than later in his term, Johnson will have to steer this fall’s negotiations from a politically diminished position. The mayor ultimately chose to neither sign nor veto the aldermen’s $16.6 billion alternative package for 2026 that landed at his desk with less than two weeks to go before a city government shutdown.
But where Johnson and the council can find a middle ground on how to plug in the still-daunting gap remains unclear — especially as the two sides continued trading barbs Thursday over the previous budget brawl that is now almost a year stale.
“While the Johnson administration works overtime to deflect from failures of its own making, the reality is straightforward — this administration abandoned Chicagoans on the most basic responsibility of governing: executing the budget,” the opposition bloc said in a statement released via Ald. Samantha Nugent’s office.
Johnson again decried the counterproposal’s debt sale as “reckless and immoral,” an attack that mayoral critic Ald. Scott Waguespack retorted was the mayor “essentially covering for his failures.” Aldermen added the measure to plug in $89 million this year, but Johnson’s finance team crossed it out of next year’s forecast after insisting there were no buyers.
Waguespack indicated Thursday they would not back down from keeping the debt sale in the next budget: “I think we should include it.”
The mayor noted the 2027 gap was initially projected to climb to $1.2 billion, and said that without long-term pension liabilities and an avalanche of city settlements coming home to roost, “we have a much different forecast.”
But some council members will likely battle him on the latter cost, which Johnson’s budget team estimated at a whopping $401 million next year. Moderates have increasingly challenged the Chicago Law Department to do more to defend the city against misconduct lawsuits, a call the Johnson administration says ignores the reality of Chicago’s long legacy of police brutality.
Should the city make no major changes to the budget, future deficits would grow to $943 million in 2028 and $1 billion in 2029, according to the Johnson administration. Under the positive outlook, gaps would shrink to $575 million and $442 million, respectively, while the negative outlook forecasts a 2028 deficit of nearly $1.4 billion and $1.75 billion in 2029.
Total costs next year are expected to rise by just over $500 million, driven by a $160 million increase in pension and bond payments, a $266 million increase in settlements and judgments, employee benefits, and fuel and energy pressures from the war in Iran and federal policies, per a handout of budget hole talking points from Johnson’s press team.
The city also assumes it will continue picking up the $175 million share of the cost of non-teacher pensions for Chicago Public Schools workers — a cost Lightfoot tried to shed. Budget officials are counting on making that payment the following two years as well. In all, pension costs for 2027 will rise to $2.94 billion.
Johnson officials would not disclose which pending lawsuits against the city were driving the high price tag of future settlements beyond acting Budget Director Jonathan Ernst noting much of the $266 million is the result of “being very, very transparent about the true cost of settlements and judgments.” Last year, the city budgeted $82.6 million for Chicago police settlements, with an even greater amount paid for in bonds.
Ernst said settlement expenses will remain high for the next several years before tapering off but “this right now, this looks like our peak.”
Chicago’s long-term debt service payments — another continued drag on the overall budget — will jump from $2.16 billion to nearly $2.5 billion in 2027.
The mayoral-appointed task force whose job was to present a menu of long-term options to attack the city’s debts reported in May the city’s main operating fund faced a $680 million structural shortfall that should persist “even under baseline assumptions.” Johnson, a former Chicago Teachers Union organizer, has so far steered clear of laying off or furloughing workers from that operating budget to make ends meet, though he has trimmed the head count by slashing vacancies.
One city union, the American Federation of State, County and Municipal Employees, gave an early warning Thursday.
“For AFSCME members on the front lines of city services, there’s nowhere to cut,” AFSCME Local 31 spokesman Anders Lindall wrote in a statement. “Going forward we’ll be reminding alders and the mayor that good governance is popular: Chicago residents want efficient and timely city services, which requires adequate staff.”
One expected swing vote, Ald. David Moore, 17th, came out the gate on Thursday with a rather specific demand for Johnson: increase spending on tree-trimming services.
“What I’m hearing in our community is again, people don’t mind paying a little bit more, but they want to be able to see when they come out of their houses that these overgrown trees are cut,” Moore said in a phone interview. “People want their everyday service. They want to come out in their garages and see the overgrowth taken care of.”
It was another distillation of the difficult path for the mayor, he faces a sizable bloc of aldermen who are philosophically opposed to his fiscal agenda, while still others will have purely transactional demands that will require some good old-fashioned horse-trading.
Johnson’s handpicked budget chair, Ald. Jason Ervin, remained nonplussed, however. “Yeah, it is what it is,” he said when asked to react to the $882 million figure on Thursday.
Ervin argued there were other options besides hiking property taxes or laying off workers.
“There’s some things. For example, I mean you could borrow, you could not do a supplemental pension payment,” Ervin said. “There are myriad of things that you could do in order to, you know, not have to lay off people, raise taxes. But are those the right things to do?”
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Johnson’s had a spotty record on the revenue front. Two of his biggest progressive pushes — the “Bring Chicago Home” effort to raise transfer taxes on pricier real estate sales and a bid for this year’s budget to reinstitute the head tax — failed at the ballot box and with aldermen, respectively. His proposal to raise property taxes in his second budget not only broke a key campaign promise but led to an early aldermanic rebellion.
Other taxes Johnson boosted or created have performed well this year, though. That includes an extended tax on online sports bets and charges on social media advertising. Raising the tax on personal property leases and rentals — a tax Johnson proposed but his council opposition pushed up more, to 15% — has also outperformed expectations. That tax applies to cars and equipment, but also digital goods like cloud computing and common software used by businesses.
Aldermen have also gone along with the mayor’s record-breaking sweeps from the city’s economic development funds known as tax increment financing districts, but Johnson’s team suggested Thursday the city would not count on another big sum from them next year, projecting a $156.7 million “decrease in TIF surplus availability.”
While only an “initial projection,” Johnson’s team is counting on surplusing just $330 million or $340 million from the city’s TIFs, netting the city around $76 million. That’s a dramatic drop from last year’s $1 billion surplus, which gave the city a $228 million revenue boost and $553 million to CPS.
Last week, Johnson separately announced his plans to close an $85.1 million projected deficit for this year with a mix of refinancing and, possibly, using the last of the city’s federal pandemic relief dollars. Neither solution is a long-term fix.