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Chicago's Budget Shortfall Crisis

Written by Subject: United States

Chicago's Budget Shortfall Crisis

by Stephen Lendman ( - Home - Stephen Lendman)

As a longtime city resident, Chicago's budget woes affect me and others residing here directly — through higher taxes and less services to make up for the shortfall.

More on Chicago's situation below.

In early October, the Center on Budget and Policy Priorities (CBPP) said the following:

Because of dire economic conditions, "(s)tate revenues are declining precipitously and costs are rising sharply…"

It's because of widespread business closures and mass unemployment.

States and local communities nationwide face "severe…budget cris(es)."

If federal aid isn't forthcoming, a bad situation will be much worse.

According to CBPP, "(s)tate tax collections for March through July 2020 were 7.5 percent less than in the same months of 2019." 

"In normal times, tax collections would have grown from 2 to 3 percent."

States and local communities face budget shortfalls throughout 2020, the problem likely to continue next year because of protracted economic weakness nationwide.

In the current fiscal year, New York and Colorado project a 17% drop in revenue if current conditions continue.

California expects a $32 billion decline in revenue next year. New York projects a $13 billion shortfall in 2021, $16 billion in 2022.

State reserves drawn on during hard times are inadequate, especially if current conditions are long-lasting, what's most likely.

Cuts in spending and services are happening in parts of the US, along with layoffs of state and city workers.

In 2020, Illinois projects a $2.7 billion decline in revenues, $4.6 billion in 2021.

If protracted Depression conditions continue throughout most of the 2020s, far greater revenue shortfalls most likely will follow — along with greater layoffs and cuts in public services.

On August 31, Chicago Mayor Lori Lightfoot announced a $799 million mid-year 2020 budget shortfall and a $1.2 billion gap for FY 2021.

Her press office said the current and projected budget gaps are "the largest in the city's history," Lightfoot saying:

"(E)conmic destruction… devastated our city, pushing people out of work and forcing small businesses to shut their doors while exposing the systemic inequalities and historic disinvestment in many of our communities." 

"We are now required to come face-to-face with a pandemic budget that limits our ability to raise revenues, even as we must build on our efforts to address these historic inequities."

Without federal aid when most needed, Chicago "face(s) very hard choices."

On Sunday, the Chicago Tribune said "Lightfoot is considering a $94 million property tax increase, layoffs (of) more than 300 city workers, and a gas tax hike as part of her plan to close a $1.2 billion budget deficit."

She may cut up to $200 million in costs for the city's 32,000-person workforce through layoffs and furloughs.

She may also refinance about $500 million in city debt. Hard choices aren't easy to make, especially if revenues are less than expected and dire economic conditions are long-lasting.

Short-term "furlough(s) for all nonunion city employees (are) under consideration," along with hundreds of layoffs, the Tribune reported.

Savings of around $13 million dollars through these steps are inadequate. Much more is needed.

She's also considering cutting "$77 million (allocated for over 1,000) unfilled positions…"

Other proposed cuts include $40 million less for public school pension contributions and less spending for street crossing guards.

According to the Tribune, she's "counting on (savings f) almost $300 million in improved fiscal management," along with "boost(ing) the city's 'cloud tax' to 9%."

It's charged on Netflix and similar online services for streaming video, music, and gaming services.

In 2018, a Liberty Justice Center lawsuit that challenged the tax was rejected by a judicial ruling upholding it.

City lawyers argued that it's not a new tax, just a reinterpretation of Chicago's amusement tax on end-users that's collected by         providers of Internet services.

Details of Chicago's 2021 budget haven't been released so far.

Lightfoot's spokeswoman Kristen Cabanban said the following:

"During this unprecedented time when we're facing the largest deficit in the city's history, we plan to present a fiscally responsible budget that is fair, inclusive and rooted in our values."

Alderman Emma Mitts likely spoke for her City Council counterparts, saying, "(w)e've never seen anything like" what's going on now.

Like other US cities nationwide, Chicago faces financial crisis conditions that may worsen and remain dire before easing at an unknown time ahead.

Chicago currently has over $46 billion in outstanding debt with only around $10 billion in reserves.

No matter what choices Lightfoot makes to address the shortfall in city revenues, she's sure to be criticized.

According to Chicago's Civic Federation head Laurence Msall, "(s)he doesn't have many good options."

Put another way, she's damned if she does or doesn't act on choices she's weighing.

City Council zoning committee head Tom Tunney said "finding revenue in a Depression-type economy (is) almost impossible."

As a city resident for over half a century — seeing firsthand the damage done to retail businesses in my neighborhood — I'm very concerned about how much worse things may get ahead and for how long.

VISIT MY WEBSITE: (Home - Stephen Lendman). Contact at

My two Wall Street books are timely reading:

"How Wall Street Fleeces America: Privatized Banking, Government Collusion, and Class War"

"Banker Occupation: Waging Financial War on Humanity"