Chicago faces $1.15 billion budget shortfall amid rising costs, funding cuts

“Chicagoans deserve the truth about the fiscal conditions of the city,” Johnson said on Aug. 29, delivering what he described as “harsh truths” at a Zoom presentation for the City Council. The mayor went on to spell out some of the reasons for the projected $1.15 billion deficit in fiscal year 2026.

“The drivers are clear: Rising personnel costs, rising health and pension costs, combined with the loss of one-time supports that previously helped balance the budget,” Johnson said.

Joe Ferguson, a former inspector general for the City of Chicago who is now president of the non-profit Civic Federation, said leaders can bridge the deficit.

“There is fat in this budget to be found and there are ways to do things better,” he said. “Folks should not be alarmed…but it’s serious.”

According to the Civic Federation boss, Johnson needs to make labor a partner in the solution and make cuts before the city attempts to increase taxes on the wealthy. In Friday’s Zoom presentation, however, Annette Guzman, Chicago’s budget director, stated that other issues are weighing down the city. 

Guzman pointed to the looming reality of cutbacks in the Trump administration’s federal funding to city housing programs, HIV/AIDS treatment, and more.  

“Areas of early childhood programs and senior care are areas where we anticipate a likely reduction at the federal level,” Guzman said.

Friday’s forecast came after Thursday’s bruising budget battle over Chicago Public Schools. The Board of Education, in a setback to Johnson, passed a budget that excludes any possibility of a high-interest loan.  Johnson unsuccessfully pushed for the loan to avert any cuts in the classroom.