Politics
Chicago City Council Narrowly OKs Johnson’s $17.1B Budget That Hikes Taxes by $165M
The Chicago City Council narrowly approved Mayor Brandon Johnson’s $17.1 billion 2025 spending plan on Monday after nearly two months of sharp debate that left alderpeople bitterly divided and the mayor politically weakened.
The budget itself passed 27-23, with just 18 days to spare, averting an unprecedented shutdown of city government.
The budget, which takes effect Jan. 1, 2025, does not include a property tax hike, even though Johnson insisted for a month and a half that was the only way to avoid what he called draconian cuts to city services and thousands of layoffs while staunching the flow of red ink threatening to consume Chicago’s finances.
The spending plan still calls for a host of other taxes and fees to rise by an additional $165.5 million, including a 2% increase in the tax levied on software licenses, cloud services and other digital goods as well as a 1.25% increase on subscriptions to streaming and cable television services.
Immediately after the vote, Johnson thanked the members of the City Council for their work getting it over the finish line and acknowledged that the hurdles felt “insurmountable” at times.
The spending plan does not cut jobs or slash city services, as Johnson demanded.
Ald. Anthony Beale (9th Ward) praised his colleagues for stopping the $300 million property tax increase Johnson initially proposed, which Beale called a “trainwreck.”
“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.”
While Beale, a frequent critic of the mayor, was always likely to vote against the budget, Johnson’s spending plan won only grudging support from his progressive allies on the City Council who blasted his handling of the budget negotiations.
Ald. Maria Hadden (49th Ward) said the spending plan will only delay “harder choices for just a few months.”
Hadden said 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,” Hadden said.
Ald. Andre Vasquez (40th Ward), the co-chair of the Progressive Caucus alongside Hadden, called the budget a “short-term fix that is not financially responsible.”
“We cannot continue down this path that undermines the progressive movement,” Vasquez said.
Two members of the Progressive Caucus voted against the budget: Vasquez and Ald. Matt Martin (47th Ward).
Ald. Daniel La Spata (1st Ward), another Progressive Caucus member, offered tepid words of praise for the spending plan.
“I do think in spite of my frustrations and challenges that democracy is represented in the budget that is in front of us today,” La Spata said. “Do I think it is a perfect and complete reflection of my values, my community values? No. But is it a budget that moves us forward in ways that are responsible? Yes.”
Johnson has consistently defended his approach to budget negotiations as a necessary break from the past when mayors expected alderpeople to rubber-stamp their budget.
“While the budget process may have been different from the past, it included truly unprecedented levels of collaboration and input from the City Council,” Johnson said. “I’m proud that today we stand as an example — an example of what’s possible when we come together to deliver real results of the people of Chicago.”
How Johnson Bridged the Gap
The last slice of the original $982.4 million budget gap officials have struggled to bridge since August will be closed with $45 million in “operational efficiencies” across the city’s departments and $23.6 million in cuts that will not require employees to be laid off or services to be cut, according to a revised budget proposal released just 24 hours before Monday’s City Council meeting.
Ten positions will be cut from the mayor’s office, including potentially some deputy mayors, to save $1 million and signal “shared sacrifice,” sources said. Johnson has appointed nine deputy mayors, more than any of his predecessors. Another $2.8 million will be saved by cutting “middle management,” according to a document obtained by WTTW News.
Officials will also step up efforts to get organizers of special events, like parades and festivals, that rely on the Chicago Police Department to reimburse the city for the cost of requiring officers to work overtime, sources said. That could mean an additional $10 million for the city, according to estimates provided to WTTW News. Another $8.6 million will be saved by reducing spending on city contracts, sources said.
In addition, city officials plan to save $40 million by spreading out payments on the debt incurred by former Mayor Richard M. Daley when he bought the 48-acre former Michael Reese hospital just south of McCormick Place for $91 million in 2009 as part of his plan to win the 2016 Olympic games for Chicago. The games went to Rio instead.
Video: Ald. Jessie Fuentes (26th Ward) discusses budget negotiations. (Produced by Abena Bediako)
That proposal will not add to the city’s already high debt burden, sources said.
The spending plan does not make significant cuts in city services, and does not lay off any city workers, as demanded by Johnson.
The City Council voted unanimously to reject his initial proposal to raise property taxes by $300 million and then quietly killed his second proposal to hike property taxes by $150 million. Johnson called off a vote set for Friday on a budget package that would have increased property taxes by $68.5 million after it became clear he did not have the votes.
During his 2023 campaign for mayor, Johnson promised not to raise property taxes, blaming the steep increases approved by his predecessors for making it impossible for longtime Chicagoans to stay in their homes.
The largest tax hike included in Johnson’s revised budget proposal will generate $128.1 million by an increase in the tax levied on software licenses, cloud services and other digital goods from 9% to 11%, records show.
Other tax increases would generate:
- $12.9 million by hiking the taxes paid by those who subscribe to streaming and cable television services from 9% to 10.25%.
- $11.3 million by hiking the tax paid by those who park in garages or use a valet service from 20% on weekends and 22% on weekdays and to 23.25% throughout the week.
- $8.1 million by charging a $3 surcharge on ride-hailing trips that start or end in the Central Business District between 6 a.m. and 10 p.m. on Saturday and Sunday. The current weekday surcharge would drop to $2.75 from $3.
- $5.1 million by charging shoppers 10 cents for each single-use paper and plastic bag at stores and allowing retailers to keep 1 cent to cover costs. The current tax is 7 cents, with store owners keeping 2 cents.
The spending plan also relies on an additional $22 million in revenue, including $7 million in additional fines, most related to parking citations, records show.
Johnson’s plan also cuts $90 million in spending, including $31 million in federal COVID-19 relief funds he had planned to use to restart the effort that sent $500 per month to Chicagoans living below the federal poverty line as part of a basic income program, records show.
An additional $29 million in federal COVID-19 relief funds that had been set to be used to help small businesses was also eliminated by the budget approved Monday, along with $13.1 million Johnson had proposed using to pay down the city’s debt. The plan also reduces the budget for the Department of Fleet and Facility Management by $3.1 million.
The new plan also closes a $40 million gap created in recent weeks when state lawmakers failed to fix an issue with the taxes levied on prepaid cellphones, officials said.
The spending earmarks $8.9 million to reverse deep cuts Johnson proposed making to the number of employees charged with implementing the federal court order requiring the Chicago Police Department to stop routinely violating residents’ constitutional rights known as the consent decree, bowing to intense pressure from advocates for police reform.
Those estimates assume that the employees who fill 162 positions set to be restored to the city’s 2025 spending plan will be paid significantly less than the average cost of a Chicago Police Department officer, who earns $150,000 annually, including benefits.
That cost of restoring the positions will be covered by an expansion of the city’s automated speed camera network into wards where City Council members have requested the cameras and a study by the Chicago Department of Transportation has found a need for speed reductions, officials said.
In all, the new cameras will generate $11.4 million, and cost $2.64 million to install, according to city projections.
CPD has fully met just 9% of the consent decree’s requirements in the more than five years since it took effect, according to the most recent report by the monitoring team.
The budget approved by the City Council earmarks an additional $208.8 million for the reform effort in 2025, documents show. Between 2020 and 2024, the city set aside $667 million to implement the consent decree, but failed to spend at least a quarter of those funds every year, according to a WTTW News analysis.
Chicago taxpayers will pay an additional $272 million into the city’s four underfunded pension funds. That will prevent the further growth of the city’s pension liabilities and save the city $3.9 billion by 2030, officials said.
In all, the city will pay $3.1 billion into its pension funds, the vast majority to comply with a state law that requires two of Chicago’s funds be funded at a 90% level by 2055 and the other two by 2058, ensuring they can pay benefits to employees as they retire.
Chicago’s Out-of-Whack Budget
Chicago’s finances remain structurally unbalanced, pinched by soaring pension costs, spiraling personnel costs and a massive amount of debt. Officials are staring into a financial abyss after hitting the so-called “fiscal cliff,” with Chicago’s federal COVID-19 relief funds exhausted and tax revenues lagging after a period of high inflation.
Johnson has fiercely defended his handling of the negotiations over the city’s 2025 spending plan, repeatedly referring to himself as the “collaborator in chief” and disputing suggestions that City Hall has been engulfed in chaos, even as he called on members of the City Council to “grow up” and stop throwing “tantrums.”
Instead, Johnson has said alderpeople were struggling to adapt to his more democratic approach after decades of mayors who refused to tolerate any opposition to their spending plans.
But most alderpeople scoffed at that, noting that all 50 members of the City Council learned Johnson had proposed a massive property tax hike from news stories published just as Johnson began his budget address on Oct. 31.
Not only did Johnson’s original budget proposal ask alderpeople to put their political futures at risk by voting for the largest property tax hike since 2016 and the second largest in Chicago history but it offered nearly nothing in return for City Council members to point to when speaking to angry Chicagoans.
For progressive members of the City Council, the political peril of that tax hike was exacerbated by the fact that Johnson’s budget proposal failed to make good on his promises to invest in working-class Chicagoans by strengthening the city’s social safety net.
That pressure fractured the Progressive Caucus, making the already difficult task of finding 26 votes for a massive property tax hike impossible as Chicago’s business community and conservative alderpeople rallied opposition to the property tax hike and demanded deep cuts in city spending.
Uncertain Future
Any relief city officials felt after the budget vote is likely to be short lived, as they wait for the reaction of the Wall Street ratings agencies to the deal.
S&P Global Ratings put the city on a negative credit watch before Thanksgiving, finding there is at least a one-in-two chance of a downgrade in the next 90 days. If that happens, it will become more expensive for the city to borrow money, making Chicago’s financial hole deeper.
“I feel good about how we’re moving forward,” Johnson said, urging the ratings agencies not to downgrade the city’s credit.
While the city faces significant financial peril in the coming weeks, Johnson’s political fortunes also hang in the balance.
The tumultuous budget negotiations have fueled a growing sense that progressives are incapable of fulfilling their promises and governing responsibly, even as Johnson sought to brush off those criticisms.
However, Johnson acknowledged the city’s ability to generate new revenue from what he called progressive sources, rather than eventually imposing a painful property tax hike, required convincing the Illinois General Assembly and Gov. J.B. Pritzker to change state law, and that would be no easy feat.
“I’m a pretty determined person,” Johnson said. “Let’s buckle up. The fight is real.”
Contact Heather Cherone: @HeatherCherone | (773) 569-1863 | [email protected]
