Chicago, the nation's third-largest city, is facing a corporate fund budget gap of more than $1 billion, while its 2025 fiscal year is projected to close with a roughly $150 million deficit with about two-fifths of the budget going toward debt service and pension costs.
Mayor Brandon Johnson said in April the city was at a crossroads and had to essentially do more with less, while simultaneously criticizing the Trump administration for reportedly threatening federal funding. The mayor's office has faced questions about the city's fiscal trajectory as bond rating agencies have downgraded Chicago's credit in recent months.
What the Left Is Saying
Progressive defenders of Johnson's administration point to external factors beyond the mayor's control, including the COVID-19 pandemic's economic aftermath and potential federal funding threats from the Trump administration. The mayor has argued that Chicago faces a different scenario than in previous years.
The Washington Post editorial board, historically left-leaning, acknowledged Chicago's dire financial situation but placed blame on what it called decades of fiscal mismanagement. The board wrote that it takes a long time to kill a city, and the bigger the city, the longer it takes, adding that Chicago's public servants have done a fine job speeding up the process.
Johnson has defended his approach to city finances, noting the need to navigate unprecedented challenges. The City Council successfully killed Johnson's proposed head tax, a per-employee levy on large corporations, which supporters said would have targeted large businesses rather than small employers.
What the Right Is Saying
Austin Berg, executive director of pro-taxpayer research group Illinois Policy Institute, said markets are looking at the true numbers and are really concerned about Chicago. He noted that spreads on Chicago debt are getting wider and wider due to structural issues.
Berg compared the city's situation to someone calling financial advisor Dave Ramsey's radio show for help with debt. The solution set is always the same: Stop making bad decisions, and you have to put a structure in place to make better decisions, Berg said. He cited using one-time revenues from federal COVID spending for operations and borrowing for operations as examples of problematic financial decisions.
Berg authored an analysis arguing that Johnson's $830 million 2025 bond deal, which delays principal payments for 20 years, represents a continuation of what he called the city's pay-later culture. He drew parallels to former Mayor Richard M. Daley's controversial 75-year parking meter lease in 2008, which critics say allowed private operators to recoup their investment while leaving the city without that revenue stream for decades.
Berg also criticized Chicago's lack of voter approval requirements for general obligation debt, noting the city is only one of two that does not require such voter input. He argued voters didn't decide to have all of that debt and those decisions affect Chicagoans 30 years from now.
What the Numbers Show
Chicago's corporate fund budget gap exceeds $1 billion. The city's 2025 fiscal year is projected to close with a roughly $150 million deficit.
Approximately 40% of Chicago's budget goes toward debt service and pension costs, leaving fewer resources for core city services.
Fitch and Kroll downgraded Chicago's bond rating in February, reflecting heightened credit risk concerns.
The $830 million 2025 bond deal delays principal payments for 20 years, a structure that financial analysts say increases total borrowing costs over time.
Chicago is one of only two U.S. cities, along with New York, that does not require voter approval for new general obligation debt.
A consulting firm EY (formerly Ernst & Young) produced a taxpayer-funded analysis identifying $1 billion in potential efficiencies.
The Bottom Line
Chicago's financial situation remains a point of contention as the city navigates budget deficits, rising debt service costs, and recent credit downgrades. The Johnson administration points to external challenges including pandemic recovery and potential federal funding reductions, while critics argue structural fiscal decisions have deepened the city's problems. With 40% of its budget consumed by debt service and pension costs, Chicago faces pressure to find sustainable revenue sources while maintaining services. Analysts on both sides say the coming months will test whether the city can reverse its fiscal trajectory or continue accumulating debt that will affect Chicagoans for decades to come.