Chicago’s spending problem demands lasting reforms, not higher taxes and one-time fixes
PRESS RELEASE from the
ILLINOIS POLICY INSTITUTE
CONTACT: Micky Horstman (312) 607-4977
Chicago’s spending problem demands lasting reforms,
not higher taxes and one-time fixes
CHICAGO (Oct. 20, 2026) – As Mayor Brandon Johnson prepares to unveil his 2027 budget proposal tomorrow, Chicagoans should watch whether his plan addresses the spending growth driving the city’s $882.4 million projected deficit or relies on higher taxes, borrowing and other short-term fixes. The city faces a projected deficit for at least the 27th consecutive year.
Illinois Policy Institute research shows Chicago’s corporate fund spending has increased by $2.3 billion, or 59%, since 2019. The city’s most recent budget projects corporate fund spending rising by $554 million, or 8.9%, to a record $6.76 billion in 2027.
When looking across all local funds — the spending over which the city has direct control — spending has increased by $4.1 billion, or 46.5%, since 2019. More than 60% of that increase went toward pensions and personnel costs, even as the number of budgeted city positions declined.
What to watch for in Johnson’s budget proposal:
- New, higher taxes on businesses. Johnson could propose a corporate head tax or higher taxes on cloud computing, social media or other business activity. These measures would raise the cost of operating in Chicago, risking jobs and investment. A group of 29 aldermen has already vowed to reject a head tax, a property tax increase and reliance on new state revenue that has not been approved by Springfield.
- Another large tax increment financing surplus. Declaring a surplus in tax increment financing districts could provide another one-time revenue injection without addressing recurring spending. This year’s projected corporate fund revenue decline partly reflects the loss of $156.7 million in additional surplus revenue used in the previous budget, but a TIF injection could offset some or all of that. Chicago TIF districts collect $1.59 billion, according to the most recent reporting. Local tax revenue for the fund is still expected to rise $72 million.
- A hiring freeze presented as spending reform. Chicago had 3,594 vacant positions as of Sept. 30. Its budgets routinely assume vacant jobs will be filled, allowing the administration to claim savings when they remain empty. A hiring freeze merely lowers projections for positions the city was unlikely to fill.
- More borrowing to cover operating costs. Johnson has proposed refinancing bonds to close the remaining $85.1 million gap in the 2026 budget. Corporate fund financial costs, including bond payments, are already projected to rise $282.1 million, or 86%. Johnson vetoed a proposal for more council oversight over bonding and the override vote failed. The proposal would have required a 3/5ths majority to authorize new bond issuances instead of the current simple majority.
- Chicago Public Schools pension payment. Johnson’s proposal may include a payment from Chicago Public Schools to cover pension costs. An unresolved payment dispute would leave uncertainty in both budgets. The CPS budget didn’t include making this payment. Last year the district made the $175 million payment the city sought.
“Chicago has a spending problem, and another round of budget gimmicks won’t fix it. City leaders keep making politically convenient choices that get them through one budget while leaving taxpayers to cover the next shortfall. Repeated reliance on temporary fixes has also contributed to credit downgrades that increase borrowing costs,” said Bryce Hill, senior director of fiscal and economic analysis at the Illinois Policy Institute. “The test for Johnson’s budget is whether it brings spending in line with recurring revenue, rather than using borrowing, new taxes, temporary revenue and vacant positions to claim balance.”
To read more about Chicago’s budget deficit, visit illin.is/882M-deficit.
For bookings or interviews, contact media@illinoispolicy.org or (312) 607-4977.