Chicago budget has jumped $6B since before COVID, faces $1B deficit in 2025
The Chicago budget has grown by over $6 billion since 2019. Despite being bolstered by billions in federal relief, the city is facing nearly a $1 billion deficit in the coming fiscal year.
The Chicago budget has grown exponentially in the years following the Coronavirus pandemic. In just five years from 2019 to 2024, the city added over $6 billion to its expenditures, a whopping 58% increase. The Chicago budget has been mismanaged for decades and is constantly facing structural deficits.
With an influx of billions in federal funding for the COVID-19 pandemic, the city had a chance to remedy these issues and set a course for financial stability. Instead, city government decided to take on costly projects and build more debt. Now with funds running out, options are limited to close a looming $982.4 million budget shortfall.
Non-personnel costs across different municipal departments comprised the largest increase in the Chicago budget, adding almost $3.3 billion. These costs include funding for the different programs and projects that the city is working on, such as infrastructure projects on O’Hare and Midway Airports, along with funding for cultural events, equipment, supplies, etc. Overall, non-personnel costs have doubled since the 2019 budget, making up more than $6 billion of the city’s $16.6 billion total expenditures.
Breakdown of non-personnel costs
Infrastructure made up over half of the growth in non-personnel costs between 2019 and 2024, with an additional $1.66 billion annually. The Chicago Department of Transportation alone has added over $1 billion in funding. This is mostly due to transportation maintenance costs and engineering costs of various projects. The U.S. Department of Aviation also added over half a billion dollars in costs from surges in development and updates on Midway and O’Hare airports.
Most of the funding for these departments comes from federal grants though they are also supplemented by various other resources such as corporate funds, vehicle and motor fuel taxes along with airport specific collections from items such as charges and user fees.
Community services added $723 million in non-personnel costs. This is mostly due to additional costs from the Chicago Department of Health, which added over $570 million in new funding. For example, epidemiology funding provided by the Department of Health went from only $5 million in 2019 to almost $300 million in 2024. Public health has mostly been funded through federal grants and is starting to see significant reductions in spending as overall federal grants decrease. Chicago’s budget forecasts $100 million less in public health costs for 2024 compared to a year earlier.
Other non-personnel departments that grew significantly were the Department of Family and Support Services, mostly to fund care for Illinois’ ever-growing senior population, and the Department of Planning and Development.
Breakdown of personnel costs
Finally, personnel costs added $724 million per year. Personnel costs amount to approximately $4.2 billion in 2024. This includes increases in wages and salaries, overtime pay and unemployment compensation. Much of the growth in this category came from wage inflation and shifting of departmental workforces. The total number of full-time equivalent employees has returned to around 36,500, close to 2019 levels after the post-pandemic dip in 2021.
The number of FTE city employees in Chicago has stayed relatively constant, with less than 200 net positions added over the five years between 2019 and 2024. Growth in personnel costs came mostly due to benefit inflation and shifting of department personnel.
Public safety contributed to the highest growth in costs for personnel. This is mostly due to the number of FTEs employed in public safety, which comprises nearly two-thirds of total FTEs in Chicago’s government. This is despite loss in overall position due to the city removing over 800 police and 1,200 staff from the emergency communications office leading to much of the personnel costs coming from excessive overtime pay. Note that teachers and Regional Transit Authority staff are not included in the city budget.
Community services personnel saw the largest growth in both wages and number of FTEs between 2019 and 2024, with the Department of Public Health adding close to 600 positions and issuing a $41,000 increase in benefits per worker. Infrastructure personnel also grew, with FTEs for both the Department of Aviation and the Department of Transportation adding 628 positions and $100 million in overall costs.
Key Issues
Growth in pension costs and debt
The second highest increase in costs came from the growth in pension funds. In 2024 Chicago will make over $2.8 billion dollars in pension contributions, marking an increase of almost $1.45 billion. This is more than double the growth in personnel costs. Despite this the pension system continues to be underfunded. Chicago’s pension debt is higher than 44 states.
Despite the high amount of federal funds into the economy, the city’s debt service costs from outstanding bonds, notes and other instruments have not decreased. More than 2 billion in yearly spending is allocated to debt service.
Federal Funding Slowdown
Federal funding has grown substantially since 2019, and the city relies too heavily on this source to fund key areas. Despite the growth, much of the spending is a temporary measure as federal funding has slowly decreased since the highs of 2022 when federal funding reached over $6 billion.
This is mostly due to lower spending for the COVID-19 pandemic which made up over half of all government funding in 2022. Though higher federal and state funds not related to COVID-19 have increased, this has not offset the decline in pandemic funding. COVID funding is set to continue its decline, leading to an overall decline in grant funds.
This has led to cuts in many areas in the Chicago budget. For example, mental health and behavioral health budgets have been slashed by nearly $49 million between 2023 and 2024. Youth and domestic violence funds have also seen large cuts. The $150 million pressure from the ongoing migrant crises does not help matters.
Benefit inflation can lead to cuts in future personnel
Inflation of benefits costs, minus pensions, have risen and for some departments, they have far exceeded inflation rates. The Department of Health for example has average benefits inflated by almost 40 percent with the average benefit per FTE being approximately $149,000, a $41,000 increase from five years ago. The average benefit in the Department of Emergency Management and Communication saw an increase of over 60 percent per FTE. These growing costs makes it easier to justify cuts in positions like the loss of 1,200 positions in the DEMC despite a rise in violent crimes. These inflated wages can have long term impacts for Chicago debt as they impact future pension payments as well, especially for those under tier 1 benefits.
Conclusion
Chicago’s ballooning budget is unsustainable. COVID funds are quickly running out, and the city has underperformed economically. Today the city faces one of the highest unemployment rates in the country and a declining population. The city has lost population for the past nine years in a row, shedding 128,034 residents. Chicago now has its lowest population since 1920, lagging far behind other large cities in terms of job growth. Much of this decline is a result of exorbitant taxes the city places on taxpayers to pay for the budget.
Clearly this extra spending has not done much to boost the Chicago economy. Rather, fiscal instability and the enduring threat of higher taxes and fees has driven people to leave and pushed away potential investment into the city’s economy.
This underscores how the city is spending too much money in areas that provide no returns on economic investments, such as the nearly $5 billion that the city is paying to cover debt. Lowering these costs should be the top priority for the city government or else there will continue to be cuts in services for vulnerable residents. Chicago also faces issues with infrastructure projects going vastly overbudget and completion dates being delayed. Not all of these costs are covered by grants and many are passed along to residents and businesses, which can diminish the long-term beneficial economic impacts these projects were supposed to have in the first place.
Chicago must embrace policy changes to ensure long term economic stability and a well-maintained budget going forward. This can start with mayor Brandon Johnson using his influence to lobby Springfield for a constitutional pension reform that can lower the burden and free-up city finances. The city should also stop using one-time gimmicks to balance the budget as these only add to future payments in debt services. Finally, the city must do a better job in justifying taking on new costs and rather focus on building up reserve funds to cover future shortfalls.