Whenever a new mayor takes office, the Chicago political playbook goes like this: Decry the massive deficit you inherited, raise taxes — the sooner the better — and blame your predecessor.
Mayor-elect Brandon Johnson may have to rewrite that script — at least, if lame-duck Mayor Lori Lightfoot has anything to say about it.
On the same day Johnson traveled to Springfield to make his case for increased revenue, Lightfoot told the Executives Club of Chicago her successor will need less of it.
In a “midyear” budget forecast released Tuesday, the lame-duck mayor argues she is handing off a budget shortfall to Johnson of just $85 million.
That’s more than a historic low for Chicago mayoral transitions. It’s a $390 million improvement from the yawning $473.8 million gap Lightfoot had been expecting, according to her previous “midyear” budget forecast, released last August.
This latest, rosier-than-expected forecast stems from higher-than-expected revenues tied to an “accelerated recovery” and the “impact of stimulus and inflation on city revenues.”
The “over-performance” of income taxes, personal replacement taxes and personal property lease taxes is so great, the outgoing Lightfoot administration now projects it will close the books on 2022 with a $554 million surplus and end 2023 with a $142 million surplus.
After prepaying $242 million in future pension debt to avoid saddling Chicago taxpayers with compounded interest, Lightfoot is essentially boxing in her successor.
She has “assigned the 2022 surplus” to a newly created “Pension Advance Fund that will help to pay for advanced pension payments” through 2026 “above the statutory requirement to stabilize funded ratios of the four pension funds,” according to the forecast.
“This one-time money will help build a bridge toward the structural revenues expected from” a downtown casino, which is expected to generate $245.8 million by 2028.
Lightfoot’s historically low shortfall also assumes Johnson will not repeal the automatic escalator she pushed through the City Council tying annual property tax increases to the inflation rate.
But if Johnson keeps that escalator in place, he’ll break a break a pivotal campaign promise not to raise property taxes.
Acting Civic Federation President Sarah Wetmore said Johnson would be wise to follow Lightfoot’s direction, at least in terms of the combined $696 million surplus.
“Rather than dedicating it to a program that is gonna recur in the future, to instead dedicate it to offset liabilities is a good use of unexpected revenue,” Wetmore said.
“It’s a one-time source. So it is a best-practice, financially sustainable use to dedicate it to a one-time expenditure, such as helping to pay down pensions.”
Lightfoot’s motivation for releasing her final “midyear” report four months early can be viewed as an attempt to burnish her reputation as a strong steward of Chicago finances and make it more difficult for Johnson to blame her.
Budget Committee Chair Pat Dowell (3rd), Johnson’s most powerful City Council supporter, said if Lightfoot’s numbers hold, it would be “great news” for the city.
But, she added, “It’s way too early to make this rosy forecast. Experience shows us that a more meaningful forecast comes into view the closer we get to the budget process and after the city audit.”
Jason Lee, a senior adviser to Johnson’s mayoral campaign and transition team, said he’s still trying to understand why “the numbers presented” Tuesday were so “different than the numbers that came out before.”
“Most people who were looking at it were saying the same thing in terms of the structural deficit. There were earlier projections that had a much bigger gap,” as well as gaps in later years, Lee told the Sun-Times.
Even if the new numbers are accurate, Lee said it will not tie Johnson’s hands or undermine his case for $800 million in business tax increases to bankroll an array of social programs that are the cornerstone of his anti-violence strategy.
“Revenue is about the structural deficit. But it’s also about investing in the city of Chicago. We still have a lot of needs … to be invested in. … We’re gonna have to evaluate all of our options because we do have commitments,” Lee said.
“The overreliance on property taxes has been a major challenge for working families in Chicago. And we want to find alternatives.”
As surprising as the revised shortfall is, Wetmore said she has no reason to doubt a surge in revenue that’s “in line with what we’re seeing” at the state level when it comes to increases in personal and corporate income taxes.
Ralph Martire, executive director of the Center for Tax and Budget Accountability, agreed, but with a caveat: It’s “not sustainable in the long term,” he said.
“What we really think is gonna happen is, it’s gonna level out and not go off a cliff — but slope down.”
