Chicago City Wire

Mayor Brandon Johnson released the City of Chicago 2025 Budget Forecast today, presenting a detailed financial outlook that addresses current year-end estimates and outlines projected revenues, expenditures, and fiscal challenges for fiscal years 2025-2027. These projections are based on historical revenue and expenditure data, current economic trends, and other factors expected to impact the City’s finances.

The forecast is built on a robust analysis integrating various data points to ensure the 2025 budget is developed with a comprehensive understanding of the City’s financial state. This approach allows for strategic consideration of long-term fiscal consequences. The forecast primarily focuses on Chicago’s Corporate Fund — its general operating fund responsible for funding basic City operations and services — where significant disparities between revenues and expenditures have historically occurred.

The collective work of the City’s fiscal teams, including the City Budget Office, Chief Financial Officer, and Department of Finance, has identified an estimated year-end budget deficit of $222.9 million for 2024 and a projected 2025 fiscal year budget gap of $982.4 million. These gaps are largely driven by rising personnel, pension, and contractual costs alongside a decrease in specific revenue streams.

"The 2025 Budget Forecast presents a significant challenge for our City, with a nearly $1 billion gap that we must address thoughtfully and strategically,” Mayor Brandon Johnson said. “My administration is committed to finding solutions that balance fiscal responsibility with our obligation to invest in the people of Chicago. Together, we will ensure our budget reflects the values of equity, fairness, and shared prosperity."

Budget Director Annette Guzman added, “The forecasted budget gap is a clear indication of the financial pressures facing the City of Chicago. It also highlights the critical need for structural solutions that address these challenges not just for the coming year but for the future. We will continue to explore all options to close this gap while minimizing impact on essential services and making prudent investments in our city's future."

Year-End Estimate

The year-end projected shortfall is driven by a decline in specific revenue streams, including the State Personal Property Replacement Tax (PPRT) and not receiving the budgeted $175 million reimbursement for pension contributions for Chicago Public Schools’ (CPS) non-teacher staff.

Local tax revenues have remained resilient with an estimated 0.8 percent increase over budget projections due to stronger-than-expected performance in transaction taxes and ground transportation taxes. However, these gains were offset by lower-than-anticipated utility taxes and other revenue sources. The City continues to leverage fund balances and explore additional cost-saving measures to ensure fiscal responsibility and an end-of-year balanced budget.

While economic conditions may fluctuate throughout the remainder of the year potentially impacting finances positively or negatively, Mayor Johnson and his fiscal leaders are focused on containing expenditures through disciplined spending and maximizing available resources.

2025 Budget Forecast

Looking ahead, the 2025 forecast projects a substantial budget gap of $982.4 million reflecting ongoing revenue challenges and rising costs. The forecast anticipates continued pressure from lower PPRT revenues and expiration of one-time funding sources that helped close previous gaps. Additionally, rising personnel costs driven by contractual wage increases, cost-of-living adjustments, and updated pension contributions significantly contribute to this projected gap.

The forecast also highlights an increase in contractual services expenses expected to rise by $16.1 million from 2024 levels due to inflationary pressures and planned enhancements in information technology services.

The 2025 Budget will mark six years since contributions began being based on actuarially calculated requirements for Police and Fire Pensions as well as four years for Municipal & Laborers Pension Funds. The City plans advance pension payments totaling $272 million in 2025 demonstrating its commitment to addressing long-term pension liabilities.

"While the road ahead may be challenging I am confident in our ability to navigate these difficulties with strength & resilience known among Chicagoans,” Mayor Brandon Johnson said. “Together we will build a budget addressing current challenges while laying foundation towards brighter prosperous future."

To access Chicago’s 2025 Budget Forecast visit: chi.gov/FY2025BudgetForecast

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