Manifolds, Manolos, and Manure
Since taking office in 2023, the Mayor of Chicago has introduced three budget proposals. First was the 2024 budget, also known as a grace period budget, proposed by a brand-new mayor, freshly elected, having never served in city government.
His 2025 budget proposal met with significant pushback. Aldermen were angered by a proposed $300 million property tax increase. Under the mayor’s proposal, the average homeowner would’ve seen a 4.8 percent property tax increase. In a rare win for a historically weak council, aldermen voted overwhelmingly against the proposal and forced the mayor to find other funding streams. Aldermen introduced and approved the responsible budgeting ordinance, which contained some budget improvements, including an earlier budget deadline to increase transparency, more power to the Council Office of Financial Analysis, and enhancing the information available to the public. Aldermen Gilbert “Gil” Villegas also reached out to the Illinois Legislature about changing Chicago’s charter to grant more power to the city council. Something that would’ve been unheard of under previous mayors.
Earlier this year, the mayor released his 2026 budget proposal. Calling it “Protecting Chicago”, the mayor called for a corporate $21-per-employee “head tax” on the largest corporations, a 14 percent cloud computing tax, and 50-cent per month per user fee on social media platforms. The proposal also underfunds the advance pension payment. However, the mayor promised to make full payments in the future. Wink. Wink. Although the budget proposal does not include a property tax increase, business groups argue that the new taxes would stifle economic growth and harm Chicago’s and Illinois’ economy.
At an appearance before members of the Economic Club of Chicago, Governor J.B. Pritzker expressed his concern about the impact of the new taxes. “I am absolutely four-square opposed to a head tax for the City of Chicago,” Pritzker declared. “It penalizes the very thing that we want, which is we want more employment in the City of Chicago, and it makes it very hard to attract companies from outside of Chicago and harder for companies that are in Chicago to stay.”
Pritzker isn’t the only one expressing concerns. A group of 28 aldermen (out of 50) signed a letter in late October detailing their opposition to the corporate head tax. They contend that the tax would hurt job growth and cause companies, including homegrown ones, to leave Chicago. Their letter also called for more spending cuts, specifically those recommendations brought forth in a report by the consulting firm Ernst & Young.
Business groups including the Illinois Chamber, Illinois Manufacturers’ Association, Illinois Retail Merchants Association, BOMA Chicago, Taxpayers’ Federation of Illinois, the Civic Committee of the Commercial Club of Chicago, SBAC, Civic Federation, and the Chicagoland Chamber of Commerce penned a joint statement applauding the aldermen who penned the letter stating that “Their leadership reflects a growing recognition that Chicago’s future depends on smart, sustainable choices that strengthen our competitiveness and signal clearly: Chicago is open for business.”
Returning to the spending cuts identified by Ernst & Young. In November, skeptical aldermen grilled the mayor’s budget team and an Ernst & Young consultant on how the firm’s recommendations were incorporated into the mayor’s proposal. Disappointed alderman argued that not enough of the efficiency measures identified in the report were included and that easy fixes like reducing an excessive ratio of supervisors to staff and mismanagement of city vehicle fleets were excluded. In response, the budget director indicated that not all the recommendations or options are feasible because Chicago is unique, and that even though the options have worked in other cities, they may not work in Chicago. The Ernst & Young study cost taxpayers $3 million.
Perhaps the icing on the mayor’s 2026 budget proposal is the ratings giant S&P Global Ratings warning that if the mayor’s budget is approved, then Chicago should prepare for a credit rating downgrade. A credit downgrade would make it more expensive for the city to borrow money and cost taxpayers more money in the long run.
Although Chicago taxpayers will bear the brunt of the mayor’s budget proposal, all Illinois taxpayers will be impacted. Chicago and the collar counties contribute a significant portion of Illinois’ economy, and in 2016, the metro area generated approximately 77.3 percent of the state’s total wages. The region is a major North American transportation hub and is home to 35 Fortune 500 companies. This conversation extends well beyond the city limits.