Primarily with inflation soaring to new highs not seen in 40 years, along with a $1.6 billion property tax levy that has nearly doubled between 2012 and 2021, Chicago Mayor Lori Lightfoot is proposing “some guardrails” to the policy she initiated in 2021.
At that time, the mayor won City Council approval for a plan to automatically raise the city’s property tax levy by the 5% or the rate of inflation, whichever is less to help pay down underfunded public service pensions.
As reported by WBEZ Chicago, Lightfoot now wants to cut the automatic property tax increase tied to the Consumer Price Index (CPI) in half. “We will not seek a CPI of 8.5%. We will not seek a CPI of 5%. Instead, we will provide taxpayers with a much-needed break and lower the CPI to 2.5%, which is the five-year CPI average,” Lightfoot said during a speech at the Chicago Cultural Center. “I believe — we believe — that this is the fair thing to do,” she said.
Under the budget proposal, Chicago property taxes will rise by $42.7 million—half of what an automatic escalator allowed—thanks to a much lower $127.9 million budget shortfall this year as compared to higher deficits in the previous two years. However, this proposed property tax increase for the 2023 budget is exclusively earmarked to pay off a portion of Chicago’s public pension funds, which is an on-going crisis that lacks a long-term solution according to an audit by the accounting firm of Deloitte & Touche LLP.
As the Chicago Sun-Times reported, Chicago closed the books on 2021 with a “total fund balance” of $679.1 million. More than $318 million is unassigned, due to “recovering revenues impacted by the pandemic” and spending transferred to federal grant funds received for COVID response.
The 2023 budget forecast that replaced the city’s preliminary budget also includes projections for the next three years. If the Chicago economy is doing well, the positive outlook forecast projects a $306.1 million shortfall in 2024 and $265.7 million in 2025. If there is a negative outlook, the deficit will rise to $951.3 million in 2024 and $1.14 billion in 2025.
Each year, Chicago prepares an annual budget that accounts for revenue from taxes and other sources and sets forth a plan for how the city intends to utilize those resources over the course of the following year.
The budget process began in the summer when City departments informed the Office of Budget Management (OBM) of their personnel and non-personnel needs for the upcoming year. OBM then prepared a preliminary budget, which was used to complete the Annual Financial Analysis. It serves as the starting point for preparing next year’s budget.
Last month, Budget Engagement Hearings were held, giving community leaders and taxpayers the chance to give input about the proposed budget. The Mayor and OMB are currently working to develop one final budget for the entire City government. When these steps are complete, OBM compiles and balances the mayor’s proposed budget, which is introduced to the City Council on or before October 15th of each year.
The City Council then holds committee and public hearings on the mayor’s proposed budget and may propose amendments to it. Once the proposed budget, as amended, is approved by the City Council, it becomes the Annual Appropriation Ordinance. The Annual Appropriation Ordinance is implemented on January 1st of the following year and represents the City’s operating budget for that year.