* 12/23/25 - The latest on Chicago’s city budget
Buzz Sawyer
The latest on Chicago’s city budgetA big step forward that the mayor should sign - but we still have more work to do
Over the weekend, City Council passed their 2026 budget proposal in a 30-18 vote. Courtesy of WTTW, here’s the breakdown of that vote:
This was significant for a number of reasons, not the least of which is it’s the first instance in my lifetime that aldermen successfully passed a budget without mayoral support. As of this morning, we’re still waiting to find out whether Mayor Johnson will veto the proposal, which would take 34 alders to override.¹ As usual, I think it’s worth unpacking the major changes from the beginning and what the current budget looks like. To be clear, our overall view is that this budget is a huge step forward from the mayor’s original proposal², and we strongly hope that he signs it. But the reality is it’s still lacking a lot of things we would’ve liked, and there’s more that needs to be done going forward for the city’s finances. Some things the alternate budget gets rightRestores the full advance pension payment This was perhaps the single most important thing to me. The mayor’s original budget had cut the advance pension payment in half, which would have been a major step backwards after years of progress. The City Council’s alternate budget restores the full payment. Our pension debt is the single biggest issue Chicago is facing, and there’s no easy way to resolve that problem other than by paying it down.³ Credit rating agencies have been crystal clear: they want to see Chicago making consistent, full pension payments. S&P downgraded Chicago last year specifically because we left intact “a sizable structural budgetary imbalance.” These payments are how - over time - we fix that. No head tax I’ve written before about why I’m skeptical of the head tax, and the Council was right to kill it. Johnson’s final version would have charged companies with 500+ employees $33 per worker per month, raising an estimated $82 million annually. Given the disincentive towards job growth in the city, I don’t think that juice is worth the squeeze, and I’m glad this is gone. Better debt collection (yes, really) This is one of the bigger - and more controversial - bits of the alternate budget, and I actually think it’s one where Council deserves more credit than it’s getting. Chicago is sitting on over $8 billion in unpaid debt, according to an excellent Chicago Sun-Times investigation. That includes $1.5 billion in ambulance bills, $2.3 billion in parking and camera tickets, $444 million in red-light camera tickets, and $3.1 billion in administrative hearing fees. Most of this is genuinely uncollectable - some are decades-old bills, or things owed by dissolved corporations or people who have left the country. But there’s also $1 billion in debt that’s accrued just since December 2023. The city just does a terrible job collecting what it’s owed. The alternate budget proposes selling about $1 billion in outstanding debt for roughly $90 million - about 9 cents on the dollar. Mayor Johnson has called this “morally bankrupt” and claims it would unleash predatory debt collectors on working-class Chicagoans. But, as alders have pointed out, his own called for collecting an additional $113 million in debt. The only difference is whether the city does it internally or sells it to private firms. Either way, we’re ramping up collection efforts. I am sympathetic to concerns that private debt collectors could be more predatory than the city - but given Chicago’s terrible debt collection record, it’s worth at least *trying* something new here. The city should keep an eye on private debt collectors behavior, but it’s not like they don’t already operate in Chicago (to collect private debts). So long as we have some reasonable guardrails in place - as Ald. Scott Waguespack has said they will - getting better at collections is a good idea. And a lax system of collections is an insult to everyone who *does* pay their bills today. If we really think a fee is inequitable, we should handle that on the front end by waiving it or tiering charges by income rather than punishing residents who pay their bills. The Sun-Times investigation also mentions city officials citing property owners and businesses from outside Chicago as the worst offenders at not paying these fines. That’s not a group unable to pay - just a group unwilling to. Pursuing those debts more aggressively seems like a very good idea. Getting this done at all I don’t want to understate how much of a genuine accomplishment it is that City Council was able to get this proposal across the line at all. We’ve seen some efforts like this in the past - including just last year - which generate a lot of talk and pushback before eventually fizzling out, mostly due to the resource constraints Council faces relative to the Mayor’s budget team. The fact that that didn’t happen this year is to Council’s credit - as well as to the credit of the myriad of outside groups and organizations that assisted them in their analyses and helped get this done. I think it is objectively a good thing to have a stronger, more empowered City Council that’s able to wield its legislative powers more effectively, and hope that continues beyond our current moment for many years to come. Some things I’m still disappointed inNo garbage fee increase As we’ve highlighted, Chicago’s garbage collection fee is absurdly low - many residents pay nothing or just $9.50 per month, while the service costs the city far more to provide. The alternate budget originally included a $15 per month fee, but it got dropped after Mayor Johnson threatened to veto it. This should have been an easy call. Raising the garbage fee would be both progressive (wealthier areas with larger homes pay more) and sound policy (user fees for services make sense). It’s also worth noting that buildings with more than 4 units already have to contract with private garbage collections. So while relatively wealthier single family homeowners are getting a sweetheart deal on city trash collection today, a large share of the city’s renters are already paying full-freight for their garbage. If that’s not enough, virtually every other major city and nearby suburb charges realistic garbage fees. Chicago is the outlier. Johnson argued a garbage fee hike would hurt working families. But working families already pay garbage fees everywhere else in America (as do those in Chicago who rent in larger buildings). And if we’re serious about matching revenues to costs, user fees should absolutely be part of the conversation. That would be both fiscally responsible and equitable. The fact that political fear kept this off the table tells you a lot about why we have a structural deficit in the first place. We’re still borrowing for operational expenses If the advance pension payment was my favorite part, this is easily the most disappointing to me. The Council kept intact $449 million in borrowing to cover $166 million in firefighter back pay and over $280 million for city legal settlements (mostly for police misconduct). The reality is that these are operating expenses, and financing their cost like this is simply not good fiscal practice - we paper over our issues this year, but end up with a bigger fiscal hole to fill every year into the future. Explaining his vote against the budget, Ald. Matt Martin put it bluntly: borrowing for operating costs is “reckless, unsustainable, and must not become a regular feature in City budgets to come.” He’s right. Put differently - to some degree, we faced the choice between a higher garbage fee and less operational borrowing, or no garbage fee hike and more borrowing. We chose the latter (I imagine to get closer to the 34 votes needed to override a veto). That’s bad. Unclear revenues The alternate proposal also includes a myriad of smaller revenue streams to close the gap. Many of these are fairly straightforward, like a higher shopping bag fee (from 10c to 15c) and a retail liquor tax (1.5% on sales of alcohol for off-premise consumption). Not all are fees - they also include $29 million in advertising on city light poles, vehicles, and bridge houses -and some seem a bit murkier to me, like $6 million from an “augmented reality” advertising program allowing companies like Pokémon Go to put digital content on public spaces like the Riverwalk. The mayor’s office was deeply skeptical of most of these revenue options, giving them far less credit than the alternate proposal does (in many cases, giving zero credit at all). The reality is probably somewhere in the middle. Advertising on city property strikes me as a good idea, and one that can generate significant revenue - and in hearings it certainly seemed like OMB was going out of their way to scorn the idea more than they ought to be. But I’m also not at all sure I’d trust things like the AR revenue to materialize immediately, and would need to understand those a lot better to have confidence in those figures. Then there’s video gambling. Aldermen project $6.8 million in 2026 from legalizing gambling terminals at bars and restaurants. The mayor’s team counters that the city will actually lose $3 million because Bally’s casino will withhold a $4 million community benefits payment it’ll no longer be on the hook for, and it’ll take months to get terminals approved and operational anyway. I think I’m probably closer to the mayor on this one. Video gambling has potential to generate significant revenue in the longer run for the city (though it’s a fairly regressive source, and I’m not sure how wild I am about further encouraging gambling throughout the city). But even if we’re able to fast-track terminal approvals, there’s a question of how quickly these become widespread. WTTW cites Ald. Anthony Beale as expecting 80% of all bars and restaurants to apply for a state gaming license. That seems really really high, which means we’re either overestimating revenues or expecting a real Vegas-ication of Chicago in a way I think will make our city worse off. What comes nextMayor Johnson has until Christmas to decide whether to veto this budget. If he does, City Council will need a two-thirds majority - 34 votes - to override him. I am optimistic that he will, mostly because those extra three votes seem like a fairly small hurdle for Council to overcome and I’m skeptical he’d want the potential embarrassment of facing a veto override. In the event he doesn’t sign, and Council is unable to override his veto, things will get hairy pretty quickly. In that situation we’ll be looking at a city government shutdown beginning on January 1st, accompanied by a nearly guaranteed credit downgrade. That would be very, very bad. And even once this budget passes, we’re by no means out of the woods. Even with some of the changes this budget enacts, in 2027 we’ll be facing a budget gap of several hundred million dollars at a minimum. This budget is a step forward from where we were. The Council deserves credit for standing up to the mayor, exerting real independence, and forcing changes. The full pension payment matters. Killing the head tax matters. Getting serious about debt collection matters. But it’s important for this budget to be a starting point, not an ending point - and it’s important that we don’t wait until next fall to keep making progress on our fiscal future. The E&Y report had a long laundry list of reforms which weren’t expected to generate savings in 2026 but would in 2027 and beyond. We need regular hearings to ensure those reforms are taking place across the city’s departments. A lot of those reforms also involved negotiating concessions from labor to ensure we can responsibly reform city spending. We need to somehow get them to the table for those conversations. And City Council’s Office of Financial Analysis is still just four people and a budget of under a million dollars, compared to a $40 million budget and nearly sixty employees for OMB. We need to change that imbalance if we want future Councils to be able to shape their own budget agendas instead of being forced by the administration to play catch up in December. Assuming this budget gets across the finish line, we’ll be in a better place than I expected we would be back in October. But I implore City Council to keep up the fight for fiscal reforms throughout all of 2026, so next fall’s budget cycle can run more smoothly and steer us into a better position for 2027. 1 It’s worth mentioning that the budget as passed enjoys the vote of 31 alders - in addition to the 30 who voted in favor, Ald. Debra Silverstein is also in favor, but was unable to participate in Saturday’s meeting as she was observing Shabbat. City Council would thus need to pick up another 3 members to override a veto. 2 An odd note: I’ve seen it referenced a few times that the alternate proposal affects 1.6% of the budget compared to the initial proposal. I think this is supposed to make the case that there’s basically no change? That seems silly to me. As we’ve covered before, around 58% of the budget is basically set in stone - it’s either Enterprise Funds, Debt Service, or Pensions. Add in Grant Funds, and that’s up to 63% or so. Then bear in mind that a lot of the Corporate Fund spending - the part we can change - goes to things like salaries for firefighters and police officers and garbagemen and other municipal workers; even if you’re tinkering around with vacancies and management positions, that’s by and large not changing much. We’re making decisions on the margin here. Viewed differently, that 1.6% is around $260 million or so by my math. Per the budget forecast in August, our initial budget gap was around $1.15 billion - so that $260 million is nearly a quarter of the budget gap we’re trying to close. 3 And, you know, not making it worse. A City That Works is free today. But if you enjoyed this post, you can tell A City That Works that their writing is valuable by pledging a future subscription. 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