Chicago Council Passes 2026 Budget to Close $1.2 Billion Gap

(Bloomberg) -- Chicago’s City Council passed a roughly $16 billion budget for 2026 — less than two weeks before the deadline — without certainty about whether Mayor Brandon Johnson will sign or veto the plan.

The council on Saturday held votes on appropriations and management ordinances needed to approve a spending plan that would close an almost $1.2 billion deficit in the main operating account, known as the corporate fund, for the third-largest US city. 

The votes capped a contentious budget process between the Johnson administration and a bloc of aldermen who disagreed with his budget proposal, including a so-called head tax that would charge larger employers a monthly fee for each worker. The revenue ordinance passed by the city council excluded the head tax.

On Friday, the council approved a revenue ordinance authorizing higher taxes on cloud computing and shopping bags as well as greater debt collections to fund the city’s annual spending plan. The package developed by aldermen also calls for a higher supplemental pension payment than the mayor’s proposal.

Johnson said Friday he hadn’t decided whether he’ll sign the budget given his concerns about selling a portion of debt collections and overall revenue assumptions. 

While Johnson’s proposed budget had included greater debt collections from internal efforts, the mayor is concerned that selling debt to an outside entity could lead to aggressive collection practices against poor residents. He and his team also have expressed concerns that revenue assumptions in the proposal from the aldermen may be too optimistic and could lead to midyear cuts.

The city needs to enact a budget by year-end to avoid a local government shutdown. Johnson reiterated his concerns about the alternate budget proposal during the city council meeting on Saturday but didn’t indicate if he plans to sign or veto it.

“Chicago’s city council today passed its most fiercely contested budget in years. The process marked a sea change in Chicago’s legislative norms,” the Better Government Association, a watchdog, said in a statement on Saturday. “It remains to be seen whether the mayor will veto the council’s counterproposal, but this has been a far cry from many years in which mayors’ proposals sailed through on nearly uncontested votes.”

Aldermen and the Johnson administration have been negotiating for weeks after the finance committee rejected Johnson’s revenue proposals last month.

The first-term progressive Democratic mayor is facing tough choices. Johnson has long championed the need for the city’s wealthiest to pay a greater share of Chicago’s tax revenues to ease the burden on poor and minority residents.

Other concerns include Chicago’s borrowing costs and a rating trajectory that has turned negative, a reversal after an upswing in recent years that helped Chicago shed its one junk rating from Moody’s Ratings in late 2022.

“We wanted to pass a budget that better addresses concerns raised by credit rating providers to help avoid a downgrade,” Alderperson Samantha Nugent said in a statement after the votes. “The question now is, will the mayor veto this budget and bring this city to the brink of a shutdown?”

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