CHICAGO ~ Chicago Mayor Brandon Johnson has released the City of Chicago's 2026 Budget Forecast, providing a transparent and honest assessment of the city's financial outlook. The forecast projects a $146 million deficit for 2025, driven by lower-than-expected business-related tax revenues, depletion of one-time reserves, and uncertainty surrounding a $175 million pension reimbursement from Chicago Public Schools (CPS).

Looking ahead, the city is facing a projected Corporate Fund gap of $1.15 billion in 2026, slightly higher than last year's forecast of $1.12 billion. This shortfall is attributed to rising personnel-related costs, including $629 million in wage, healthcare, and pension growth, as well as an ongoing structural imbalance between recurring revenues and expenditures.

In addition to these challenges, the city is also facing unprecedented threats from the federal government. Cuts to Medicaid, SNAP, violence prevention programs, and public health funding are expected to have direct and indirect impacts on Chicago's budget and financial future. Furthermore, the expiration of American Rescue Plan funds will add to the strain on the city's finances.

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The state-level pension reforms without any new tools for raising progressive revenue at the city level have also added significant costs to Chicago's pension obligations in the coming years.

Despite these challenges, Mayor Johnson remains optimistic about Chicago's ability to overcome them. "This forecast shows both the scale of the challenge before us and the strengths that make Chicago capable of meeting it," he said. "We have one of the most diverse and dynamic economies in the world."

The forecast includes three potential economic scenarios through 2028: a baseline projection with modest growth and persistent inflation; a negative case where recessionary conditions widen the shortfall to over $2.0 billion by 2028; and a positive case where stronger growth narrows the gap to about $716.4 million by 2028.

Some key findings from the forecast include projected Corporate Fund revenues of $5.26 billion in 2026, a 9.1% decline from 2025 due to the loss of $424.6 million in one-time resources and uncertainty surrounding CPS pension reimbursements. On the other hand, Corporate Fund expenditures are projected to increase by 10.7% to $6.41 billion in 2026, driven by personnel services, pensions, and contractual services.

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Since 2023, the city has made over $820 million in supplemental contributions to slow the growth of unfunded liabilities. For 2026, the Corporate Fund's share of pension obligations is expected to be $907.8 million, including $219.4 million in supplemental payments.

Budget Director Annette Guzman emphasized the importance of transparency and discipline in addressing the gap. "This forecast makes clear that we cannot rely on one-time resources or uncertain reimbursements to sustain core services," she said. "Our structural challenges are real, and they require durable, recurring solutions."

The 2026 Budget Forecast serves as a planning tool and not a spending plan for the city. It provides City Council and residents with a clear understanding of the fiscal challenges and trade-offs that need to be addressed. Mayor Johnson will present a balanced budget recommendation to City Council this fall.

The full FY2026 Budget Forecast is available on the Office of Budget and Management website for those interested in learning more about Chicago's financial outlook for the coming years.

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