+ Revenue, Efficiencies, and Savings

The Budget Gap

Our current budget gap is $1.2 billion, driven largely by decades of underfunding pensions for police officers, firefighters, and other City workers. To put the size of the gap in perspective: even if we eliminated the entire Fire Department budget—nearly 20% of the City’s discretionary spending—we would still fall short of closing the gap.

We know that we need new revenue, structural reforms, and efficiencies to meet our obligations. However, the City’s ability to raise revenue on its own is extremely limited.

The Illinois Constitution prohibits taxing higher incomes at higher rates (i.e., taxing the rich the most), and most new local taxes require approval from the State. As a result, the primary tools available to the City are sales and property taxes, both of which put pressures on working people. That reality makes meaningful engagement with the State essential. City leaders must work with Springfield to expand the options available to us and develop a sustainable path forward.

At the same time, we must get more creative about spending our money smartly. During the City Council’s Budget hearings, I submitted detailed questions regarding unused software licenses and the effectiveness of various workstreams, but City departments were unable to provide clear answers. If the City continues to ask for more from taxpayers, we must demonstrate that we are spending existing funds wisely. We know there are opportunities to run City government more efficiently, and we need to pursue them.

Borrowing

This year’s budget includes $449 million in reckless borrowing to cover basic operating expenses. These aren’t unexpected costs: for many years, we have known that these expenses would ultimately come due and should have made plans for them accordingly. While the current Mayor and many members of the City Council did not cause our budget crisis, we have a responsibility to not make things worse.

Critically, this borrowing comes at a cost: $70 million in interest payments paid to big banks. Those funds would be better spent on affordable housing, public safety, infrastructure, and pension stabilization. And if credit rating agencies downgrade Chicago's credit rating in response to this reckless borrowing, we’ll have to pay over $400 million in increased borrowing costs just for the borrowing the City does next year. That’s twice what the Mayor is proposing to invest in homeless services next year, and over four times what he is proposing to invest in affordable housing.

We can’t afford to give that money to big banks when our constituents need it most. This is a key reason I voted “no” on both the Mayor’s initial budget proposal, as well as the amended version that the City Council passed. Borrowing for operating costs is reckless, unsustainable, and must not become a regular feature in City budgets to come.

Debt Collection

Next year’s budget includes $202 million from more aggressively pursuing past-due water bills, parking tickets, ambulance bills, and other types of debt owed to the City. The Mayor’s initial budget included $113 million in debt collection that the City itself would collect, sometimes with assistance from third-party contractors.

In addition to that, the adopted budget directs the City to sell $90 million in debt to private collection agencies. I have real concerns that this could, in some cases, empower predatory debt collectors to shake down those Chicagoans who struggle the most to pay their water bills and ambulance debt.

Notably, the City has never pursued a debt collection practice like this. Some of the City’s budget experts warn that collection agencies may decline to purchase some of this debt, which could result in devastating mid-year cuts to City services.

Other Revenue

Cloud Computing Tax

An increase in Cloud Computing Tax is expected to bring in $425M next year—the largest additional revenue source in this year’s budget.

The Mayor and members of the City Council proposed this tax as an alternative to raising property taxes. In large part, this tax will impact big businesses that store huge amounts of data, and are the largest subscribers to cloud computer services.

But small businesses and everyday consumers should also expect to pay more. Some small businesses use customer databases with cloud storage that will be impacted by this tax. Similarly, residents with Ring cameras will likely pay more in video storage fees, or even those who use DropBox and Google Drive.

Moving forward, Chicago will have the highest cloud computing tax in the nation. Some say this will discourage new tech start ups in Chicago and impact small businesses and consumers. Others say it’s a forward thinking step given the number of new data centers opening up, and a better way to share residents' tax obligations with large companies.

TIF Surplus

Once again, this year’s budget includes an historic $233 million in TIF surplus. Since 2019, the City has sought to surplus unused TIF funds as aggressively as possible.

As a reminder, when the City surpluses TIF funds, those funds are returned to various taxing bodies. The City receives less than 25%, while Chicago Public Schools receives the largest portion at over 50%. CPS also faces a significant budget gap and is relying on these surplused TIF funds to avoid mid-year budget cuts.

I commend City leaders for more aggressively surplusing TIF funds in recent years. Too often, these funds have been used to subsidize large, luxury developments, rather than support communities that most need these investments.

Still, I want to caution that moving forward, we may have exhausted this option as a way to fill significant gaps in the City’s and CPS’s budgets. Because recent surpluses have been very large, we now have less money available for worthwhile capital projects at local parks and schools.

Social Media Tax

One of the more unique elements of the 2026 budget is a tax on large social media companies including Meta, TikTok, and X. Under this first-of-its-kind proposal, companies with at least 100,000 users would pay a monthly tax of 50¢ per Chicago-based user.

Although funds from this tax are earmarked for public health and mental health programs including the City’s CARE program (see the Public Safety Investments section below), the budget does not assume that funds will actually be spent in 2026.

That’s because the Mayor’s Office (which proposed this tax) anticipates that social media companies may sue to prevent the tax from moving forward. And even if the City were to successfully defend a lawsuit—which is by no means guaranteed—it’s possible that the lawsuit would not be wrapped up before the end of 2026.

Rideshare Tax

In 2019, the City created a rideshare surcharge between 6am and 10pm for Uber and Lyft rides that depart from the transit-rich Central Business District. Currently, this surcharge is $1.50 and applies to the area bounded by North Ave, Lake Michigan, Roosevelt Rd, and Ashland Ave.

The 2026 budget expands these surcharge boundaries to cover broad swaths of Lincoln Park, Lakeview, Wicker Park, Bucktown, West Loop, and Hyde Park.

Gambling Terminals

Currently, the City does not permit restaurants, bars, or taverns to install gambling terminals. The budget legalizes these terminals, and anticipates that the City will collect $7 million in licenses fees from terminal owners.

The City’s Budget Director disagrees with these projections, as she anticipates that relatively few new terminals will be installed and that Bally’s (the operator of our downtown casino) will withhold future payments to the City in retaliation to terminals that it believes will eat into casino profits.

Liquor Tax

The budget changes how retail sales of liquor are taxed by adding a flat 1.5% tax, instead of the previous tax tied to container size. For consumers, it specifically applies to liquor that you take home, rather than drink on-site.

It’s not clear how much revenue this will raise for the City. Some argue that this change will bring in $6 million of additional revenue in 2026; however, the City’s Budget Director contends that the City will lose $4 million.

Alternatives

The City needs more tools to adequately address its budget challenges. That’s why we need City leaders to work collaboratively with the State to provide us with more options. In recent years the City’s relationship with Springfield has been unnecessarily rocky. That needs to change.

I believe the City should ask the State for a larger share of its income tax revenue, for example. As recently as 2011, Chicago and other cities across Illinois received 10% or income tax revenue from the State. Today, however, cities and towns receive approximately 6.5%. The Illinois-based Center for Tax & Budget Accountability estimates that a return to 10% would net Chicago an additional $290 million annually. To put that in perspective, that’s more than the entire budget for the City’s Department of Housing.

With help from the State, the City could also collect a tax on tickets resold on Ticketmaster and other secondary markets for sporting and music events. (Currently, the City is only permitted to tax the initial ticket sale.) In addition, the State could permit the City to charge a delivery fee paid by Amazon and other large retailers, to offset the traffic congestion, air pollution, and street wear-and-tear to which delivery vehicles contribute. And if the State removes loopholes to the personal property replacement tax that corporations pay on their profits, Chicago could receive over $100 million in new revenue annually.

Given our poor track record in Springfield, however, we can’t expect that our fiscal challenges will be solved solely through State action. That requires us to scour City coffers for unused funds. A good place to start is the Catalyst Fund, which has remained largely inactive since its creation in 2017, but is sitting on over $30 million in funds that aren’t being put to use.

We should also settle on a policy to tax vacant lots that owners could put to productive use but are intentionally keeping vacant—either due to complacency or tax avoidance.

Savings and Efficiences

Earlier this year, the City commissioned two separate reports to identify efficiencies that the City could pursue to close its budget in 2026 and beyond—one from the auditing firm Ernst & Young, and the other from a task force composed of local business and labor leaders. Using the recommendations from these reports, next year’s budget includes $127 million in efficiencies that the City may be able to realize next year, and a laundry list of potential longer-term efficiencies the City can pursue in future years.

Some of the efficiencies contained in the budget are one-time fixes, like selling used City vehicles ($3 million) and vacant City-owned land ($18 million).

Others are structural fixes that help Chicago budgets each and every year, like expanding the City’s ability to use warranties to cover the cost of repairing and replacing City vehicles, and to recover costs associated with police officers and firefighters responding to false fire and burglar alarms.

I look forward to the City adopting more structural efficiencies over the next few years—in particular, modernizing our outdated procurement system and civilianizing certain positions in our Police and Fire Departments so that first responders are spending more time on providing emergency service and less time on timekeeping and other HR-related functions.

+ Investments

Public Safety

Since the start of the pandemic, federal funds stood up a number of vital public safety initiatives, including our mental health first responder pilot, support for survivors of gender-based violence, and gun violence prevention work. We are at a critical juncture as those funds expire, requiring the City to find ways to continue those programs.

This budget cycle, I drilled into plans to sustain our mental health first responder pilot, or CARE Program, which has dispatched paramedics and clinicians to respond to mental health-related 911 calls in the 47th Ward for the last five years. While the 2026 budget maintains its funding, the long-term success of this program is far from assured.

For one, the program lacks sufficient buy-in from leadership at the City’s Department of Public Health (CDPH), whose Commissioner has expressed a desire to reallocate CARE staff to other, non-emergency priorities. And while the budget includes funding to sustain the 49 full-time positions that currently exist, the pace of hiring has been anemic—three quarters of these positions remain unfilled. For this pilot program to be successful, we need strong and visionary leadership to remove hurdles to bring this vital program to scale.

The 2026 budget includes $2.1 billion for the Chicago Police Department—over one-third of City discretionary funds. Given our growing budget gap, we must continue asking CPD and every other City department to operate more efficiently without sacrificing the levels of service our communities need. With these goals in mind, I passed a law early last year requiring the City to conduct a staffing analysis for all of CPD. Unfortunately, CPD and the Mayor’s Office have repeatedly failed to meet staffing-analysis deadlines, and the City Council continues to wait on a final analysis that was supposed to be provided months ago.

But we don’t need to wait for this staffing analysis to move forward with common-sense reforms. In recent years, for example,CPD’s overtime spending has ballooned, more than doubling between 2019 and 2024. Although overtime spending has finally leveled off, it still exceeds annual spending caps. The 2026 budget includes a more realistic overtime cap, but the final version stripped out an earlier provision that would prevent CPD from exceeding this cap without prior City Council.

Other City Services

While I have serious reservations with many aspects of the 2026 budget, I’m glad that the City Council took action to avert cuts to Chicago Public Library jobs that the Mayor had originally proposed in his budget. Many of our branches are already understaffed, with 100 fewer employees than before the pandemic. Further cuts would lead to fewer specialized librarians, decreased programming, and longer wait times for books to be delivered through interlibrary loan.

These positions will be preserved with a $9 million increase to the library property tax levy, a dedicated funding stream that goes directly to library operations. This small adjustment will cost most 47th Ward homeowners around $12 per year to provide sustainable resources for library branches serving every Chicago community.

Unfortunately, the 2026 budget cuts funding for traffic safety improvements, threatening progress we’ve made in reducing the frequency of traffic crashes that seriously injure or kill pedestrians, cyclists, and drivers. The budget cuts hundreds of millions of dollars previously dedicated to the Department of Transportation’s Vision Zero and Complete Streets initiatives, which target improvements for high-crash intersections near schools and parks and for high-use corridors including Irving Park Road and Clark Street. Notably, these initiatives have contributed to a 30% decrease in traffic fatalities and an 18% decrease in serious traffic-related injuries across Chicago between 2021 and 2024.

The Mayor’s Office contends that the impact of these cuts will be limited, in part because federal funds will continue to fund these safety projects. However, the City shouldn’t build a safe streets strategy that relies so heavily on the Trump administration—particularly when the administration’s transportation chief signaled earlier this year his desire to aggressively shift federal infrastructure dollars away from large cities including Chicago.

+ Moving Forward

The City’s Budget Director projects a budget gap of at least $450 million for 2027. While this gap is noticeably smaller than the 2026 budget, that shouldn’t be a cause for comfort. The City may collect less revenue than projected, which would necessitate additional taxes and/or spending cuts in future years. And a broader nationwide economic slowdown could further depress revenues and exacerbate the 2027 budget hole.

That’s why Chicago’s fiscal health must remain a top priority for the City Council as we head into the new year. Simply put, our budget challenges are too significant for the Council to turn away from the budget in the first half of the year as often happens. Whether it’s small-group discussions with local policy experts, monthly committee hearings that spotlight emerging revenue and expenditure trends, or frequent trips to Springfield to engage our State counterparts, the City Council must stay engaged year-round on the City’s budget like never before.

+ New revenue, savings, and efficiencies

• $425 million from increasing the Personal Property Lease Tax, which applies primarily to cloud computing services, from 11% to 15%
• $233 million from declaring a TIF surplus, with an additional $552 million from the surplus going to CPS to help stabilize the District’s budget for School Year 2025-26
• $202 million from selling debt owed to the City
• $102 million in efficiencies suggested in the EY audit report, including closing certain vacant positions, reducing spending on non-government attorneys, and accelerating vacant land sales
• $101 million from a hiring freeze and other personnel-related savings
• $29 million from new advertising on City bridge houses, light poles, fleet vehicles
• $26 million from imposing a 2% tax on online sports wagering
• $26 million from expanding the congestion fee zones for Uber and Lyft beyond the central business district
• $9 million from increasing the tax on plastic bags by 3¢, from 10¢ to 15¢
• $9 million from raising the library property tax levy to avoid layoffs of librarians and security guards
• $7 million from license fees paid by operators of gambling terminals
• $6 million from adjusting the liquor tax by replacing the existing unit-based tax with a percentage-based tax on off-premise liquor sales
• $4 million from increasing the boat mooring tax
• $3 million from enhanced enforcement of the City’s environmental benchmark ordinance, which requires owners of large residential and commercial buildings to track and report energy use annually

+ Substantial new investments

• $6 million to maintain the existing number of summer youth jobs while complying with minimum wage requirements
• $5 million to assist with rapid rehousing of unhoused Chicagoans