Chicago Mayor Pitches Budget Relying on Uncertain State Help

(Bloomberg) -- Chicago Mayor Lori Lightfoot proposed an $11.7 billion budget for 2020 that pulls levers she can control such as a vehicle congestion fee and department mergers but also relies on uncertain help from the state to close the biggest shortfall in recent history.

The spending plan unveiled Wednesday relies on $352 million in new revenue. Of that, about $47 million is expected from a plan to curb congestion including higher ride-sharing fees and $31 million more tax increment financing dollars to close an estimated $838 million deficit for 2020, according to the city. Refinancing debt may yield $200 million in savings.

Lightfoot, who took office in May, inherited a cash-strapped city scrounging for resources. While her proposal blends several structural changes such as improving revenue collection and efficiencies such as cutting some vacant positions, her reliance on state lawmakers in Springfield leaves a lot of uncertainty. More than $50 million of the new revenue would come from a real estate transfer tax that needs state approval, and longer-term savings from pension reform and new cash from a proposed casino would also need state support.

“It’s a strong effort by a new mayor trying to close an $800 million deficit,” said Laurence Msall, president of the Civic Federation, which analyzes municipal issues. “There are things we don’t know unless Springfield approves them.”

Lightfoot’s proposal comes as she’s under pressure from the Chicago Teachers Union, which has been on strike since Oct. 17 and whose supporters were demonstrating outside City Hall during her address, to pour more resources into schools. Even though the city and board of education have separate budgets, they share a tax base and face rising pension costs.

The state’s General Assembly will meet for its veto session next week and again in November, and those six days may prove crucial to get measures helping Chicago approved before the city council votes on the budget later this year.

Pension Costs

State Senate President John Cullerton “looks forward to working with the mayor to solve problems,” his spokesman John Patterson said in an email Wednesday without offering specifics. “We’ll have to see what the caucus thinks.”

Lightfoot needs help from the state to address issues including the tax structure of a proposed Chicago casino that would generate revenue, as well as pension reform. The city’s annual projected pension contribution climbs to $1.68 billion in 2020 and will exceed $2 billion in 2022, city documents show.

“Cities around the state face enormous fiscal challenges, and the governor believes that balancing Chicago’s budget is an important step in stabilizing our overall fiscal health to benefit all our state’s residents,” Emily Bittner, a spokeswoman for Governor J.B. Pritzker, said in an emailed statement Wednesday. “The governor will encourage the General Assembly to give the mayor’s proposals their full consideration during the veto session.”

The new mayor “is doing everything she can” and discussions with state leaders outside Chicago are expected to ramp up, said Alderman Scott Waguespack, head of the city council’s finance committee. “Springfield is going to be very difficult,” Waguespack said after the budget speech. “They’ve got their own ideas.”

Lightfoot during her speech said that without state help, she’ll “be forced to make more painful choices when it comes to new sources of revenue.”

One of the hard choices could city-wide property tax increases. Her predecessor Rahm Emanuel had enacted a record property-tax hike and higher utility levies to fund pensions.

While a property tax hike isn’t popular politically, it is a lever the city can pull with home rule that would present fewer hurdles, said Carol Spain, an analyst for S&P Global Ratings. “It gives us comfort that the city hasn’t taken a property tax increase off the table if it doesn’t get legislative support,” Spain said.

--With assistance from Danielle Moran.

To contact the reporter on this story: Shruti Date Singh in Chicago at ssingh28@bloomberg.net

To contact the editors responsible for this story: Elizabeth Campbell at ecampbell14@bloomberg.net, Michael B. Marois, William Selway

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