Chicago's city council Wednesday moved closer to adopting a city budget alternative advanced by a slate of its members and pushing Mayor Brandon Johnson's proposal to the side.
The city is nearing a Dec. 31 deadline to pass a 2026 spending plan. Chicago operates on a calendar year budget.
At Wednesday's City Council meeting, Ward 9 Alderman Anthony Beale successfully introduced a substitute resolution shifting the calendar for the next five City Council meetings to put budget talks on an accelerated calendar, with the next meeting happening Dec. 15 instead of Dec. 17.
Beale is one of the signatories to the alternate budget that alders presented to the mayor on Dec. 2. The group has been working with fiscal watchdog organizations, including the Civic Federation and the Civic Committee of the Commercial Club, to come up with solutions to
"There's an opportunity here to eventually come together in a way that signals that the city can proceed in a grounded, fiscally responsible way," Civic Federation President Joe Ferguson said. "We are (currently) on a path to a previously unimagined, second-best outcome, which is the City Council stepping into its own… to do the right thing for all Chicagoans."
On Monday, Johnson began to circulate a revised proposal for a corporate head tax, or Community Safety Surcharge, to City Council members. With
In a Tuesday press conference, he said the new version would target companies with more than 500 employees and would raise the rate per month on those roughly 175 companies to $33, which his team projects would raise $82 million.
"We are talking about the largest corporations in the city. We are not talking about your local retail shops; we are not talking about your mom and pop restaurants. We are talking about the companies who have done exceedingly well in this current economic climate," Johnson said, naming JP Morgan and Bank of America as among those who benefited from "the largest upward transfer of wealth in our nation's history" thanks to the Trump administration's tax and spending bill.
Johnson argued the head tax was in effect in Chicago for more than 40 years, and its
"Chicago lags other cities in taxing corporations to fund vital services for our residents," he said.
The revised head tax is "a reasonable and responsible measure which asks the city's largest corporate beneficiaries to contribute their fair share toward maintaining the essential services and ensuring the long-term fiscal stability of the city," the city's finance team said in an emailed statement Thursday.
The version released Monday is "a modest surcharge" which will only represent "a fraction of a percent" of the monthly payroll costs of Chicago's largest corporate citizens, the statement said, noting that research has found no adverse impacts on job growth or business retention from similar tax/fee structures.
The mayor's revised head tax did not appear to have swayed alders in the alternate budget working group.
"Nobody's persuaded by the arguments that the mayor is making in terms of the economics of it," said Justin Marlowe, research professor at the University of Chicago's Harris School of Public Policy and director of the Center for Municipal Finance. "If the goal is to make big business pay its fair share… you're working with companies that are that much more likely to pass the costs on to someone else."
He added, "The business community has come back again and again and said its opposition is to the spirit of this tax. What matters the most to the business community is that there's going to be an additional cost to employing people in Chicago… They just don't like the message."
Business groups also don't like the precedent it would set, said Howard Cure, partner and director of municipal bond research at Evercore Wealth Management.
"The mayor seems to be fixated on this head tax," he said. "You have burdened taxpayers already, and how hard is it for some businesses to relocate just outside of the city or in Indiana and still conduct business?"
The mayor's proposal "didn't move the needle at all," Ferguson said of the revised tax, adding that the revised tax made things worse because it narrowed the number of businesses and increased the burden those businesses would face, creating a greater incentive to leave for companies perfectly capable of doing so.
The accelerated City Council schedule for next week "creates the space for consideration of all of the budget proposals, the alternatives from the working group of 26 to 28 alders that… responds to the concerns of the finance industry, the rating agencies and the markets, addressing many of the things that S&P put in its negative outlook letter as tripwires for a downgrade," he noted. The City Council has 50 members.
Ferguson said changes to other provisions in the mayor's proposed 2026 budget — such as the
"We have all overweighted attention to the bright shiny object that is the corporate head tax," he said. "On those (other) areas, there has literally been no alternative, no signal of compromise coming from the mayor's office when that is the greater concern… We're in two separate lanes."
The cutback of advance pension payments and borrowing for settlements and back pay "are things that are going to be scrutinized," Cure said.
"The advance pension payment is an important tool for the city to manage its pension liability, and the city is committed to additional funding for the advance should additional funding become available in the budget," the city's finance team said. "We will not compromise the city's long-term path to financial stability in order to pass an unstable or irresponsible budget. Any changes or adjustments would need to align with that commitment."
The working group alders also put together some revenue-raising alternatives "that are worth looking at, as far as garbage fees and liquor taxes and rideshares," Cure said. "It doesn't seem as if the mayor — even though he commissioned it — is using the
His administration commissioned the report to offer solutions to the city's budget gap.
A shutdown remains unlikely, multiple sources stressed. But Marlowe said with respect to the city's credit quality, "the damage is already done."
Recent events have "reinforced the view that a lot of investors have about Chicago — can't make tough decisions, can't compromise, can't agree on a way forward," he said. "
It raises the question of whether Chicago can make the kind of tough decisions necessary to ensure that bondholders get paid, he added.
But things could always get worse. "You could point to other cases where situations like this have resulted in multi-notch downgrades," Marlowe said. "The vote margin of approval on the budget that's ultimately passed matters. There's a difference between getting 32 votes versus 26, and the rating agencies will be watching that."
S&P Global Ratings assigns Chicago's general obligation bonds a BBB rating and revised its
Fitch Ratings rates Chicago A-minus with an outlook it
The big-picture question is where and how the mayor will spend his remaining political capital, Marlowe said. If he is unwilling to budge, "then we could see a shutdown… we could see a much more catastrophic set of outcomes with the city's credit quality," he said.
"This game of chicken… is really about how deeply this mayor believes in his core values," he added. "Forcing him to appear to be compromising on his core values could very well lead to a much bigger conflict."
