Chicago is staring down an $882.4 million budget hole for 2027, and Mayor Brandon Johnson is pointing fingers at both historic fiscal mismanagement and his opponents on the City Council for the predicament. The gap, unveiled by Johnson's administration this week, is smaller than the $1.2 billion shortfall the city could have faced. However, it still leaves City Hall scrambling for a mix of cuts, efficiencies, and new revenue before the mayor presents his fourth budget proposal to aldermen in October.
The projected deficit represents a 23% reduction from the $1.15 billion gap estimated a year earlier, according to WTTW News. Still, the underlying math is brutal: pension and bond payments alone will rise $160 million in 2027, while long-term debt service climbs from $2.16 billion to nearly $2.5 billion, and total pension costs balloon to $2.94 billion, per the Chicago Tribune. Overall costs for 2027 are expected to rise just over $500 million compared with the current budget.
Where the Money Is Going
Rising expenses are piling up across multiple fronts. Settlements and judgments, employee benefits, and fuel and energy costs are set to increase by $266 million in 2027, and police misconduct settlements alone are projected to cost $401 million, a steep jump from the $82.6 million the city budgeted for police settlements this year, the Tribune's reporting shows. Johnson has also committed to a $364 million advance pension payment in 2027, a move his administration has framed as fiscally responsible even as it adds to near-term pressure.
Some one-time revenue sources are also drying up. Chicago's tax-increment financing surplus totaled $1 billion last year, but availability is expected to shrink by $156.7 million next year, even as the city still plans to surplus $330 million to $340 million from TIFs. TIFs overall are expected to net around $76 million for the city next year. The city also continues to assume it will keep paying $175 million for non-teacher pensions owed by Chicago Public Schools workers, an arrangement tied to the school district's own budget disputes with City Hall.
A Few Bright Spots Amid the Gloom
Not every revenue line is underperforming. Chicago's social-media advertising charges and its extended tax on online sports bets both performed better than projected in 2026, offering rare good news in an otherwise grim ledger. The personal-property lease and rental tax was also increased to 15%, another lever the city has already pulled. Johnson's administration has additionally trimmed city headcount by eliminating vacant positions, part of what officials describe as ongoing efforts to hold the line on spending without resorting to furloughs.
Johnson has avoided city worker layoffs and furlough days throughout his tenure, but he did not rule out layoffs when discussing the 2027 gap, while separately saying he hopes to avoid cuts specifically in the police and fire departments. He also refused to rule out raising property taxes in a city election year, even as he and all 50 City Council seats face voters in February 2027 — the final full budget cycle before that election.
Council Friction and Credit Downgrades
The tension between Johnson and aldermen has already reshaped this year's budget once. In December, the City Council majority passed its own version of the 2026 budget for the first time in 40 years, a $16.6 billion package that rejected Johnson's proposed $21-per-employee corporate head tax — estimated to raise $100 million — and instead leaned on increases to the plastic bag tax, liquor taxes, and advertising revenue, according to the Civic Federation. Johnson has called the aldermen's debt-sale measure reckless and immoral governance, even as he continues to say he will pursue progressive equitable revenues rather than balance the budget on the backs of working people.
That governance friction hasn't gone unnoticed by Wall Street. Chicago suffered two ratings-agency downgrades earlier in 2026, with Fitch Ratings citing budget impasses between Johnson and the council as a factor impeding structural fiscal balance, as previously reported by CBS News. S&P Global Ratings had already downgraded the city's general obligation debt to BBB in January 2025 and maintained a negative outlook through last November, citing persistent structural deficits and depleted reserves.
Those competing outlooks illustrate just how much is riding on the choices Johnson and the council make in the coming months. Under the city's positive outlook, the deficit could fall to $575 million in 2028 and $442 million by 2029; under the negative outlook, it could balloon to nearly $1.4 billion in 2028 and $1.75 billion by 2029. Baseline assumptions put the gap at $943 million in 2028 and $1 billion in 2029.
Long-Term Fixes Still on the Table
A mayoral-appointed task force reported a $680 million structural shortfall in the city's main operating fund back in May, a finding Hoodline previously reported alongside the task force's proposed fixes, including downtown congestion pricing, expanded consumer service taxes, and tying property taxes to inflation. Johnson has said he plans to incorporate some form of progressive revenue into his fourth budget plan and intends to keep seeking ways to tax wealthy residents, even after voters rejected the Bring Chicago Home real estate transfer tax initiative at the ballot box in March 2024.
Passing whatever Johnson ultimately proposes will require 26 City Council votes, or 25 with the mayor breaking a tie. Johnson's political team has scheduled a special announcement for September 13, though details of that event were not disclosed. The budget rollout in October will also test a finance team in transition: Budget Director Annette Guzman resigned in August, leaving Deputy Budget Director Jonathan Ernst as acting director just weeks before the proposal is due, a leadership gap Hoodline detailed in its report on City Hall's budget chaos.
