Mayor Brandon Johnson on Thursday proposed a $16.6 billion budget for next year that reinstates Chicago’s corporate head tax while scaling back an extra pension payment, kicking off what could be the freshman executive’s most grueling budget process yet.
The recommendation is a mishmash of fixes that leans on $438 million in new taxes and fees. It avoids unpopular ideas such as a property tax hike, a grocery tax or a garbage fee increase but adds a new charge on social media tech giants and a monthly $21-per-employee tax on larger companies, according to a Wednesday briefing with reporters.
Johnson’s proposal — a 3% decrease from this year’s spending plan — slashes 446 city jobs, a cut that includes layoffs of some whose pay is funded by federal grants or pandemic relief money that is set to run out.
Other one-time tricks — a record $1 billion sweep of tax increment financing funds, refinancing old debt, borrowing money to pay for settlements and labor contracts and a continued hiring freeze — would help cover another significant chunk of the deficit. That gap is newly projected to be $1.19 billion, $40 million higher than Johnson initially disclosed.
The mayor also wants the city to not make its full extra pension payment, which is designed to cut down future costs for taxpayers.
Johnson’s initial version of the spending plan is likely to undergo significant changes as he tries to round up votes before the City Council passes it, but his Thursday budget speech to aldermen went all out in embracing his progressive values.
And while the budget fight with council members over the next few months will come down to the thorny politics of dollars and cents and who pays what, his remarks endeavored to tie the urgency of his wishlist to an existential fight against President Donald Trump, whose toxic reputation among most Chicagoans provides timely political cover for the mayor during a difficult first term.
“They are trying to militarize and occupy our city. But it’s not just the boots on the ground, y’all. What is even more devastating is the economic attacks: the Trump cuts,” Johnson said on the council floor. “The Protecting Chicago budget protects Chicagoans from Trump’s cuts and his attacks on our city.”
Johnson would go on to invoke Trump more than a dozen times in his speech.
Taxes, new and old
The mayor opted to skip even an inflation-tied property tax hike next year, a remarkable sea change from fall 2024, when he broke a campaign promise by coming out the gate proposing Chicago’s largest hike in almost a decade. Aldermen wouldn’t go along with that, and Johnson abandoned it for the 2025 budget.
To steer clear of that third rail entirely reflects how much pressure the looming February 2027 election adds on him and the City Council. But Johnson refused to tell reporters his move if aldermen nonetheless pressed for a property tax increase over other levies or cuts.
While it might seem unlikely for aldermen to now support higher property taxes, they will certainly feel intense pressure from bigger businesses to dump the head tax and find another way to raise the $100 million Johnson projects from it.
“I did give you my answer. I am not proposing a property tax. Like, I can’t make it any more emphatic than that,” the mayor said when asked Wednesday if he’d sign a budget that raised that tax. “If I’m open to it, I would be proposing it. I’m saying I’m not offering one. That is my answer.”
Aldermanic opposition apparently killed the mayor’s previous call to reinstitute the 1% grocery tax that was phased out by Gov. JB Pritzker, and to hike garbage collection rates, which was proposed by his handpicked budget working group.
Instead, after a bold corporate payroll tax hit legal snags, the mayor pitched his $21-per-employee tax on corporations as the next frontier in his largely-stalled leftist economic agenda. It would be charged on companies with more than 100 employees who work more than half their time in Chicago.
The $100 million would be set aside in a “Community Safety Fund” to pay for existing violence reduction programs that have been heavily subsidized by federal pandemic relief money that is nearly tapped out. $18.4 million would go to new community violence interruption or reduction grants to outside agencies.
A head tax of $3 and later $4 per employee was put in by Mayor Richard J. Daley and chugged along for nearly four decades before Mayor Rahm Emanuel phased it out by 2014 as part of his administration’s pro-business agenda for downtown.
Johnson said the tax is dual-purpose. The money would address what business groups say is their top concern: crime. And it would weaken some of the Trump tax breaks granted to the wealthiest across the country. Johnson’s team estimates only the top 3% of businesses in the city would be subject to it.
The mayor’s progressive base has already embraced a revival of the head tax in lieu of other nickel-and-dime charges that hit the city’s middle and lower class. Even so, more moderate and big-business opponents are expected to deem the head tax dead on arrival over fears it would kill jobs.
Johnson sought to rebuff that attack in his Thursday speech.
“To those who say this is a fee that is anti-business, I say that investing in building a much safer city is the most pro-business investment,” the mayor said. “If we defund the programs that have helped us make this past summer the safest summer in a generation, we will … play into the hands of the far right who want to paint our city as a dangerous and lawless destination.”
In all, a slew of new or expanded “revenue enhancements” including the head tax would fill $437.5 million of the 2026 budget gap.
The biggest chunk would come from another hike to the city’s personal property lease tax, which includes a tax on cloud software and infrastructure. The levy goes up from 11% to 14% under Johnson’s proposal. That “tax on big tech” would net $333 million.
The mayor plans to expand the zone where Lyft and Uber riders must pay a congestion surcharge, bringing in an extra $65 million. A hike to the boat mooring fee, dubbed by Johnson as a “yacht tax,” is expected to bring in another $4.1 million. An online sports betting tax — details still undisclosed — is projected to raise $26.2 million, while a long-pending hemp tax that still needs state approval would yield an estimated $10 million.
Another bold Johnson idea is to charge the country’s largest social media companies — including TikTok, Meta, YouTube, and X — $0.50 per active user over 100,000 in Chicago. He’s counting on the “social media tax” to raise $31 million and help fund mental health services that were also largely paid for with pandemic relief money.
Pensions, borrowing add to credit downgrade fears
Johnson plans to sweep more than $1 billion out of the city’s tax increment financing accounts, known as TIFs. That’s nearly double last year’s record $570 million. Of that, the city would get to keep an estimated $232.6 million, while Chicago Public Schools would receive $522 million.
In its summer budget, CPS assumed Johnson would declare enough TIF surplus for the district to net $379 million. Johnson now expects CPS to send back to the city the additional $140 million in TIF money, in order to reimburse the city for non-teacher pension costs the city had been picking up, essentially closing the city’s 2025 year-end deficit.
Offloading that cost from the city’s books is a long-held goal the city argues CPS — or the state — should take on. CPS’ fiscal straits led to the city eating the last $175 million payment it was owed, helping tank its rainy day funds. Johnson’s proposed budget does count on a CPS pension reimbursement in 2026.
Several aldermen promised to grant the biggest surplus possible in the final throes of CPS’ budget fight. But a surplus that large could also mean certain TIF-funded projects are scaled back, eliminated, or delayed, likely angering some aldermen with the most TIF money, as well as building trades that count on the construction jobs TIFs generate.
Johnson’s plan more than halves the city’s planned advance pension payment next year, from $271.8 million to $120.2 million. Though not a legal requirement, the mayor’s own finance team insisted on making the extra payments despite last year’s deficit. They argued that shoveling extra money into the city’s four ailing funds would save billions down the line. The move also won praise from ratings agencies that help determine how much taxpayers owe in interest costs when Chicago borrows money.
Predecessor Lori Lightfoot was able to earmark past extra pension payments thanks to American Rescue Plan Act (ARPA) dollars that padded the rest of the budget. As reserve dollars dwindled, the casino money city officials hoped would be flowing by now is still a relative trickle. Casino revenue is expected to only hit $40 million next year.
While the payment was still a priority, “we also made the decision that there are other priorities that we needed to fund as well,” Chief Financial Officer Jill Jaworski said during Wednesday’s press briefing.
“Certainly, not paying the full advance payment carries a risk that we could get a downgrade,” Jaworski told reporters the next day. “Would I be concerned if the council tried to reduce it? Yes.”
The city would also borrow to make good on $185 million owed in back pay to Chicago firefighters, a $90 million “global” payment to resolve misconduct claims against former Chicago police Sgt. Ronald Watts, among other legal settlements.
While that frees up dollars in this year’s budget, it tacks on interest costs in future years — firefighter debt would be paid back over three years, city briefing documents said, and the settlements over five years.
Jaworski did not say on how much the city might borrow and the extra cost, as the bonds’ size and timing would not be determined until next year when the city must tap into the money, she told reporters Thursday.
But she defended the additional debt by noting the settlements were extraordinary costs that would have cost even more if the city hadn’t reached the Watts settlement. The city’s approach to one-time measures were reasonable, she said, but “do carry a risk.”
The progressive agenda
The mayor must clinch 26 out of 50 votes by the end of this year to avoid a city government shutdown, a worst-case scenario that Chicago came closer to than ever last budget season. That’s an especially fraught task under this “Wild West” era of City Council defined by aldermen who are as rebellious as they are fractious.
Johnson will need to again reach across the council’s political aisle and turn to horse-trading to get this budget over the finish line. The Progressive Caucus, usually his most ideologically aligned faction, is not sizable enough to get him to a majority alone and also produced some of the “No” votes last budget cycle.
Nonetheless, the mayor’s 2026 proposal nods to some leftist funding asks and avoids operational layoffs in a bid to appease labor, another arm of Johnson’s political base.
The budget does shrink the city’s headcount by 446 people, affecting positions covered largely outside the city’s corporate fund, including grants from ARPA or other special charges. The mayor’s budget director, Annette Guzman, did not offer a specific layoff figure to reporters Wednesday, though she noted some of those employees could be bumped into existing vacancies.
Meanwhile, Johnson aims to rein in Chicago police spending — a perennial dream of local grassroots activists — by adding a $200 million cap on overtime, with further funds requiring City Council approval. Guzman said Superintendent Larry Snelling and his team expressed that “for next year, they are in line that this is a realistic goal for them.”
The total budget of the Chicago police — the city’s most expensive department — would go up by $37.9 million to about $2.11 billion. That is due to salary bumps from the police union contract, which will offset savings from the overtime cap and an unknown number of vacancies being cut, per the mayor’s spokesperson. Johnson during the 2023 runoff famously vowed to not cut CPD spending by “one penny,” after his earlier support for the “defund the police” movement dogged him on the campaign trail.
The city would also carve out additional money from the corporate fund to sustain its non-police response team to mental health crises, also known as the Crisis Assistance Response and Engagement Program, that has been funded by ARPA dollars up to now. A new $31 million revenue stream created by the social media tax would fund that program as well the two mental health clinics reopened under Johnson.
Chicago’s summer youth jobs program, which has grown under Johnson, will again receive $50 million in funding. The proposal also sustains a $7 million investment in early childhood education made in May, which also served as a sweetener for the Service Employees International Union that represents many of those workers. SEIU affiliates were part of the labor coalition that played a critical role in getting Johnson elected, but a dispute with the Chicago Teachers Union has threatened that unity.
The Department of Environment, which Johnson brought back in his first budget, would receive more regulatory power, and the Rapid Rehousing program for the homeless would get $5 million in permanent funding after COVID funds expire. The Office of Re-Entry and other services for formerly incarcerated Chicagoans would receive $7.5 million in funding from the cannabis tax.
And the Law Department would receive an additional $1 million to go toward an “affirmative” litigation arm designed to fight back against Trump’s attacks on Chicago, including ongoing deportation raids as part of “Operation Midway Blitz.”
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