Chicago Faces $85M Budget Shortfall in 2024, Says Lightfoot While Defending Her Financial Legacy

Mayor Lori Lightfoot unveils the forecast for the 2023 Chicago budget on Aug. 10, 2022. (WTTW News)Mayor Lori Lightfoot unveils the forecast for the 2023 Chicago budget on Aug. 10, 2022. (WTTW News)

Mayor Lori Lightfoot said Tuesday she will leave Chicago in a much better financial condition than she found it, promising that Mayor-elect Brandon Johnson will face a historically small budget gap of just $85 million in 2024.

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The projections detailed by Lightfoot represent a significantly rosier financial picture for Chicago than the forecast released in August, when city officials projected a likely budget gap of $473.8 million in 2024. 

That means the city has seen a postive financial swing amounting to approximately $390 million in eight months, the last time city financial officials released projections about Chicago’s financial condition.

The projections compiled by the Lightfoot administration assume that the city’s property tax levy will rise to match the increase in the cost of living, a controversial policy put in place at Lightfoot’s instance in 2020 that proved politically radioactive during the just completed mayoral election. 

Read the full mid-year budget forecast.

Lightfoot scrapped plans to hike property taxes by $42.7 million to keep pace with soaring inflation after hitting a brick wall of opposition on the City Council in the months before city officials faced voters. 

During the mayoral campaign, Johnson promised not to raise Chicagoans’ property taxes, vowing to roll back the increases tied to the increase of the cost of living, calling property taxes already “painfully high.”

The 2024 budget gap would likely be approximately $90 million larger without a property tax hike to cover inflation, officials said. Raising the property tax levy is the most effective way for city officials to raise revenue and ensure expenses do not outstrip costs.

Lightfoot unveiled the good news Executives’ Club of Chicago alongside her top financial aides Tuesday afternoon, and once again recounted the shock she felt when she took office in 2019 and got a complete look at the city’s budget, which included a deficit of $838 million, after taking over for former Mayor Rahm Emanuel, who did not seek reelection.

As she prepares to leave office in 27 days, Lightfoot’s announcement amounts to a brush-back pitch to Johnson. While new mayors often blame their predecessors for whatever financial mess they find after taking office, Lightfoot’s decision to pull the curtain back on the city’s financial forecast months earlier than usual will make that more difficult for Johnson.

The forecast released Tuesday projects budget gaps of $124 million in 2025 and $145 million in 2026.

Lightfoot said she had some advice to offer her successor, whom she predicted would never be mayor of Chicago.

"Don't screw it up," Lightfoot said, prompting laughter from the room full of movers and shakers.

Lightfoot said Chicago was in the best financial condition it had been in decades, thanks to her team "delivering this up on a silver platter" to Johnson.

By comparison, the city faced a budget shortfall of $170.6 million in 2023, after Lightfoot scrapped the property tax hike proposal. 

In a statement, Lightfoot and her aides touted her commitment to “transparency” in the city’s budgeting process. 

However, Lightfoot has not held a formal news conference since she finished third in the race for mayor, failing to advance to the runoff. The mayor was not set to take questions from reporters after her speech on Tuesday.

A spokesperson for Johnson declined to comment on the mayor’s announcement, saying the mayor-elect is preparing to address the General Assembly in Springfield on Wednesday.

Chicago’s financial picture has been buoyed in recent years by the city’s red-hot real estate market, a faster than anticipated recovery from the depths of the COVID-19 and nearly $2 billion in federal aid designed to help the city withstand the ravages of the pandemic. 

Chicago likely ended 2022 with a surplus of $554 million and is projected to end 2023 with a surplus of $142 million, officials said.

Lightfoot’s administration encouraged Johnson to use the 2022 and 2023 surpluses to pay down the city’s pension debt. The mayor used $242 million from an unanticipated surplus in 2021 to make the first-ever additional payment toward the city’s pension debt, winning plaudits from Wall Street ratings agencies.

Johnson’s budget plan endorsed efforts to pay more than required by state law to the city’s pensions.

In all, Chicago owes $33.7 billion to its four employee pension funds representing police officers, firefighters, municipal employees and laborers, according to the 2021 Annual Comprehensive Financial Report.

In 2024, Chicago will pay more than $2.41 billion to its pension funds. Those payments are set to increase only slightly as compared with 2023, after years of massive increases in order to comply with the terms of a state law designed to force the city’s pensions to be funded at a 90% level by 2045.

The projections from the Lightfoot administration also attribute the city’s robust financial position to officials’ efforts to pay down what the city owes, resulting in a $747 million drop in the city’s debt load. That has allowed the city to fund its infrastructure program and social safety net expansion without borrowing additional funds, officials said.

The budget projections for 2024 do not rely on any federal relief funds designed to strengthen the city’s tattered social safety net and provide direct aid to Chicagoans struggling to recover from the COVID-19 pandemic, officials said.

However, it is not clear how much money has yet to be spent as part of what Lightfoot called the Chicago Recovery Plan, and how much will carry over into the Johnson administration. 

City officials spent just $130.5 million of the $1.227 billion earmarked for a host of programs including affordable housing, mental health, violence prevention, youth job programs and help for unhoused Chicagoans, according to data released in October as part of the mayor’s 2023 budget proposal.

City financial officials have declined to respond to requests from WTTW News about how much was spent as part of the Chicago Recovery Plan in 2022, and how much will remain unspent when Johnson takes over on May 15.

By comparison, the city spent nearly $1.1 billion in federal COVID-19 relief funds in 2021 and 2022 and used another $152.4 million in 2023 to shore up the city’s pandemic-devastated budgets. That filled Chicago’s coffers with cash, helping the city end 2021 with a surplus of $318 million, according to the city’s annual financial report.

Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]

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