4 ways Chicago’s 2025 budget fails, plus hikes property taxes

Chicago Mayor Brandon Johnson’s 2025 budget proposes a nearly $1 billion deficit. High personnel and pension costs have Johnson breaking his campaign promise not to hike property taxes. Plus there’s no plan for long-term fixes.

Mayor Brandon Johnson asked for a $17.3 billion budget for fiscal year 2025 that includes a $982 million deficit, a personnel spending increase of $168.7 million and pension costs of $2.92 billion.

To fill the city’s massive budget gap, Johnson is now backpedaling on his campaign promise not to hike property tax. The budget he presented Oct. 30 includes a $300 million property tax increase, just days after 14 aldermen sent him a letter urging him to reject the tax hike.

Johnson spokeswoman Erin Connelly said Chicago homeowners will see about an average 4% increase on their bills per 2023 values, but that the figure may be subject to change.

Ald. Byron Sigcho Lopez, 25th Ward, is one of Johnson’s closest allies. “A property tax increase for us is something that we in our community cannot afford,” he said of his Lower West Side and South Lawndale neighborhoods.

Chicago’s 2025 proposed budget will likely continue the city’s legacy of financial irresponsibility. The city squandered its previous opportunity to fix its financial issues, as $1.3 billion in federal pandemic relief bolstered the general funds budget between 2022 and 2024. Now, federal aid is expiring and the proposed budget will return Chicago to its old habits of overspending and adding debt.

Across all city funds, expenditures will continue to grow in every major budget area in 2025.

Considering the persistent obstacles ahead, Johnson’s budget failed to include any request for pension reform. Without any attempt to reform the city’s unsustainable pension system, Johnson won’t be able to provide Chicago with the long-term financial stability it needs.

The city council’s budget hearings will take place during the next two weeks, from Nov. 6 to Nov. 20. According to the law, the budget must be finalized by Dec. 31.

Here are four reasons Johnson’s 2025 budget proposal doesn’t present a sustainable approach to managing the city’s fiscal problems of unrestrained spending, untenable tax burdens and unrelenting pension debt.

1. The proposed budget increases personnel spending despite declining revenue, perpetuating the city’s structural deficit problem.

Personnel spending and pension costs have both increased substantially since 2019. Most personnel costs are paid through the general funds budget constituting $3.53 billion of the total $4.21 billion spent on personnel. The 2025 budget’s personnel costs will add roughly $168.7 million in the general funds budget, which will be mostly paid through a combination of taxes and fees.

One way to rein in spending and allocate resources more effectively is to cut current excess staff. Instead, the mayor plans to reduce the addition of new employees, eliminating 744 unfilled positions across multiple departments. For example, the Chicago Police Department will lose 456 vacant positions.

Despite these cuts, many departments will still have significantly more personnel than they employed pre-pandemic. For example, community services departments will have 559 more full-time equivalent employees in 2025 than they had in 2019.

Public safety departments will have lost 2,140 full-time equivalent employees since 2019, including 457 vacancies in 2024 alone. This loss comes despite the city’s rising violent crime rates.

Contract services will comprise about 10.4%, or about $583.4 million, of corporate fund expenditures in 2025. The proposed general funds budget expects to end 2025 with tax revenue and expenditure of $5.623 billion. This is a $538.4 million reduction from the forecasted budget.

Prior year resources, which include unexpended funds, reserve savings and revenue from prior years, are expected to be $367.6 million in 2025. Although this is $139.7 million more than what was forecast, it will still leave limited funds available for current projects or future emergencies.

2. Property tax increases for residents cement Chicago’s title as the most tax-burdened city in America.

In his budget address, Johnson said he “grappled” with the decision to increase Chicago property taxes “for weeks and weeks.” He stated, “I directed my budget team to look at all options at closing this budget gap, and when it came down to either mass layoffs and curbing vital city services or an increase in property taxes, we chose to increase property taxes.”

Johnson’s proposed budget includes a $300 million property tax increase, breaking his campaign promise. Total property tax collections are projected to be $2.12 billion in fiscal year 2025. Of that, $1.66 billion will go toward pension payments, while $379.2 million will go toward debt service and libraries.

Chicago’s property taxes have already more than doubled since 2014 and are among the highest in the nation. Even a modest additional tax increase will amplify the economic challenges and uncertainty Chicago residents and businesses are facing. These challenges include the city’s ongoing struggle with high unemployment rates and persistent departures of both its residents and businesses.

To make matters worse, Chicago is also facing an affordable housing crisis. Property values in the city have experienced high rates of growth in recent years. Almost 43% of Chicagoans face high housing and rental prices exceeding the benchmark 30% of income.

During his speech, Johnson also referenced his real estate transfer tax, attributing its failure to pass as the explanation for the city’s strained finances and subsequent need to increase property taxes in 2025. Johnson’s real estate transfer tax, and Gov. J.B. Pritzker’s proposed progressive income tax, were both rejected by voters because of the burdens and barriers they placed on small businesses.

Prior to Johnson’s budget address, 14 aldermen sent a letter to the mayor asking him to support constituent demands to reject the tax hike, reinstate the city’s ShotSpotter contract and finalize contracts with city firefighters.

3. Chicago’s pension and debt crisis will remain unrestrained, crowding out funds for critical services.

Pension costs will be the second-largest source of corporate fund expenditures in 2025, at 16.8%. The 2025 budget will allocate more than $2.9 billion to pension contributions.  That’s an increase of about $1.6 billion since 2019, and $70 million more than what was forecast.

The city’s debts, from outstanding bonds, notes and other instruments, also remain high, with a long-term obligation of about $26 billion. Chicago will allocate more than $2.1 billion in 2025 to debt service payments. The city’s unrestrained pension costs and debt accumulation are major impediments to its revenue growth.

The city’s debts and unfunded pension liabilities will continue to crowd out funding for other critical areas of the budget. For example, pension costs have already diverted funding from youth and domestic violence programs and mental health services.

Chicago’s ongoing structural deficit problem requires structural pension reform. An amendment to the Illinois Constitution is needed to curb the growth of future benefits. Without such reform, the city’s spending will continue to outpace its revenue, and future budgets will provoke additional tax hikes.

4. Chicago’s 2025 proposed budget will continue to rely on temporary funding.

The city’s 2025 budget proposal will continue its tradition of misallocating tax increment financing funds to bridge budget gaps. In 2025, $132 million will be collected by the city, while $300 million will go toward the Chicago Public Schools’ budget deficit. CPS is facing financial issues of its own, owing a $175 million pension payment to the Municipal Employees’ Annuity and Benefit Fund.

The city’s federal grants’ allocations will contain less COVID-19 relief funds. Along with American Rescue Plan Act funds and the Local Fiscal Recovery Funds, the COVID-19 grant funds will provide 14.1% of the city’s total grants. Most COVID-19 funds are set to expire within the next two budget years. The city will need to determine how to sustain permanent programs that are currently funded by these temporary grants.

Recommendations

The only way Johnson can break Chicago’s legacy of continuous deficits and tax hikes is to commit to finding long-term financial solutions to balance the budget. This includes:

• Implementing a cost-conscious budgeting strategy that explores all other viable options before raising taxes. This means consolidating the four pension funds, finding more stable options for covering pension costs rather than depending on unreliable casino revenue, which is likely to fall short, and fixing staffing and overtime issues in the Chicago Police Department.
• Stricter enforcement of hiring freezes, except for the Chicago Police Department and other on-the-ground public safety personnel. Although Johnson initiated a hiring freeze in September 2024, the city has added 268 new employees since then. When the city makes personnel cuts, they consistently turn to cutting positions from public safety. This is not optimal, as high crime rates deter economic growth. Instead of cuts to public safety positions, the city should explore cutting non-essential and administrative roles.
• Conducting a thorough analysis of personnel expenses. Many departments remain bloated, with non-essential workers and personnel costs taking an ever-increasing portion of the general funds budget.
• Avoiding one-time resources and short-term tactics that delay debt payments and lead to larger deficits in future budgets. This includes halting the exhaustion of COVID-19 relief funds and the overreliance on tax increment financing surpluses to fill in funding gaps.
• Using the power of the pulpit to influence legislative fixes for Chicago’s pension predicament, such as requiring a constitutional amendment to be placed before voters. Ending the 3% automatic increases to cost-of-living adjustments and setting them to the rate of inflation would help control pension costs. This, along with setting appropriate salary caps can save the city billions going forward.