Chicago Faces $1.15B Budget Deficit in 2026, $146M Shortfall in 2025

Chicago is facing a projected $1.15 billion budget deficit in 2026, exceeding previous estimates, with an additional $146 million shortfall expected for the remainder of 2025. The city’s financial challenges are driven by soaring pension costs, rising personnel and healthcare expenses, and declining revenue, including a 9% drop in Corporate Fund revenues and uncertainty surrounding Chicago Public Schools' pension reimbursements. Mayor Brandon Johnson emphasized transparency about these fiscal challenges and ruled out a property tax increase for 2026, instead advocating for 'progressive' revenue options targeting wealthier residents and businesses. The city’s budget outlook includes three scenarios, with the baseline predicting modest growth and persistent inflation, while a negative forecast anticipates a recession that could widen the deficit above $2 billion by 2028. Chicago has made substantial supplemental pension payments to slow unfunded liabilities, but pension obligations remain a significant burden, with nearly $2.85 billion due in 2026 to comply with state funding requirements. Budget proposals will undergo further review in the City Council, with Johnson planning to seek support for revenue measures and prepare official recommendations by October.