Chicago faces a nearly $1 billion deficit in 2025

Chicago is facing a $223 million deficit for 2024, and a forecasting a 2025 deficit of nearly $1 billion driven mostly by pension payments and lower tax revenue, city officials announced Thursday morning.

Why it matters: Imposing new taxes and fees, allowing video gaming, and making budget cuts are all on the table to fill the gaps, Mayor Brandon Johnson said during a media budget briefing.

What they're saying: "There are a plethora … of options on the table that my administration will be exploring collectively," Johnson said.

• "But to make decisions based upon a [budget] snapshot is not responsible governance."
• Still, he noted major budgetary "structural damage" that needs fixing as he wades into his second year on the job.

Zoom in: A big part of the deficit comes from shortfalls in the Personal Property Replacement Tax (PPRT) collected by the state and distributed to local governments.

• PPRT funds to Chicago are expected to drop by $169 million in 2024 and fall even further next year when the law will allow some companies to significantly reduce their tax burden.

The intrigue: Johnson dodged questions about which taxes the city might hike, but he alluded unhappily to voters' rejection of his progressive Bring Chicago Home legislation, which could have generated $100 million a year from high-end real estate transactions.

• When asked if the deficit was driven at all by migrant spending or expiring COVID funds, budget director Annette Guzman stressed emphatically that it was not and repeated that it was largely about "underperforming revenue."

Between the lines: When asked if the deficit means putting the brakes on plans to restore mental health clinics, the mayor vowed that clinics in Roseland, the Legler Library and near UIC will still open.

Reality check: Last year the city forecast a $538 million deficit for 2024, but the updated report now predicts less than half that amount.

Flashback: Grim budget forecasts are nothing new for Chicago mayors. In 2015, the expected budget shortfall was close to $1 billion, forcing then-Mayor Rahm Emanuel to enact a $543 million property tax hike, the largest in city history.

• In 2019, then-Mayor Lori Lightfoot inherited a budget crisis, with expected shortages ballooning close to $1 billion, again. Her fix was to refinance debt and add taxes to ride sharing, while also successfully lobbying Springfield for the city's first ever casino license.
• In 2021, the expected budget shortfall rose to historic levels ($1.2 billion), thanks in part to over $700 million in pandemic-related expenses. Lightfoot used $350 million in federal COVID-19 relief funds to help bridge the gap.

What's next: Johnson has tasked freshman Ald. William Hall with exploring new revenue sources and says he'll be working "with city council and all stakeholders to come up with viable solutions that will ultimately provide … sustainable solutions that speak to the interest of working people."

• This fall will bring a series of meetings and amendments, with a finalized budget due in late December.