New mayors have often entered office at a disadvantage when they discover a massive budget deficit their predecessor left behind.
When Mayor Rahm Emanuel took office in 2011, he pegged the city’s budget shortfall at $636 million, blaming predecessor Richard M. Daley for profligate spending. Mayor Lori Lightfoot faced similar circumstances in 2019, when she said Emanuel left her an $838 million gap.
But the outgoing mayor’s financial team said Tuesday the administration is leaving Mayor-elect Brandon Johnson with a projected budget gap of just $85 million for his first year.
That’s a drop in the bucket compared to the city’s overall $16.7 billion budget. That gap would remain “relatively low” in 2025 at $124 million and 2026 at $145 million if Johnson’s administration sticks to his predecessor’s recommended budget practices, city officials project.
[ Pension debt, property taxes, budget holes: Chicago’s next mayor faces huge financial problems ]
Tuesday’s numbers are much smaller than the city’s forecast from the summer of 2022, which predicted a $475 million deficit in 2024 and $550 million the following year. They’re even smaller than updated estimates the city laid out in bond disclosures in January: those showed 2024 and 2025 deficits cut down by about $190 million total, thanks to better-than-expected revenue collections.
The latest forecast, which city officials are presenting at an Executives Club event Tuesday afternoon, does not count on federal COVID-19 relief money to close gaps, the city said. The forecast does include debt service payments, stock market losses that were slated to balloon pension deficits and “conservative” assumptions about how a potential recession might affect the city’s budget.
The sunnier forecast is helped along by an “accelerated recovery” in the city’s economy, the city release said, “along with the impact of stimulus and inflation on City revenues” like income, personal property replacement, and lease taxes.
Lightfoot tried to tout her fiscal discipline on the campaign trail. She highlighted her dedication to pay down the city’s pension obligations, secure new revenue streams from the Bally’s casino, a deal to sell water to Joliet and a $750 million reduction in outstanding debt since she took office in 2019. But after losing in the first round, the latest announcement offers a chance to burnish her legacy.
“This updated Mid-Year Budget Forecast is proof of the work my administration has done to bring about the City’s financial turnaround,” Lightfoot said in a release. “As a result, we can now project the lowest sustained budget gaps in decades … And this financial turnaround has been acknowledged independently by the rating agencies through 13 upgrades and three positive outlooks over the last eight months.”
Those ratings agency upgrades will only hold if the city maintains its fiscal discipline, city budget officials said, including a dedication to raising the city’s property tax levy to match inflation and making advance pension payments to offset stock market losses.
[ Mayor Lori Lightfoot’s decision to tie property taxes to inflation may result in mammoth bills next year ]
Johnson has voiced his opposition to raising property taxes, saying Lightfoot’s policy to tie increases to the rate of inflation exacerbates the city’s housing affordability crisis.
“Property taxes are already painfully high, and as mayor, Johnson will not raise them further,” Johnson’s campaign platform promised.
Lightfoot’s team has defended those inflationary property tax hikes, arguing that if the city had raised the levy bit by bit to keep pace with inflation dating back to 1977, the sale of the Skyway, the Millennium parking garage, and a series of costly bond issuances would have been unnecessary.
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April 18, 2023 at 12:05PM