CHICAGO — Mayor Brandon Johnson on Friday unveiled a $1.15 billion deficit for 2026, an unsurprising but still formidable hurdle heading into his third budget.

Having taken a 2026 property tax hike — which faced long odds of success in a restive City Council in any event — off the table, Johnson heads into the fall budget season still talking about “progressive revenue” to close the yawning hole, but without having shared a specific plan that doesn’t resort to the layoffs he wants to avoid.

“My responsibility as executive is to present a budget that reflects the values of what the people of Chicago desire,” Johnson told reporters in a briefing Friday morning. “Without significant shifts in how we balance our budget, the services that the people of Chicago have begun to rely upon, they would certainly be in jeopardy.”

The huge shortfall was expected. Johnson has been blunt about the soaring deficit for months, teasing a figure as high as $1.2 billion. Friday’s forecast projects a similar $1.16 billion shortfall in 2027 and $1.23 billion in 2028 under a “base” outlook where current economic trends continue.

Johnson also announced a $146 million projected shortfall that must be filled before the end of this year, thanks to the Chicago Board of Education’s “uncertain” commitment to reimburse the city for non-teacher pension costs.

The mayor’s tall budget task for next year includes wrangling a City Council featuring many progressive allies and more moderate opponents still chapped from last year’s negotiations, which extended weeks longer than usual and were in constant flux.

Any “significant shifts” in taxes and fees or cuts to city spending will be challenging to make roughly a year out from the mayor and aldermen hitting the campaign trail for re-election. The potential impact of President Donald Trump’s economic policies on inflation, coupled with his threats to withhold other federal grant money, also linger.

The 2026 gap — equal to about 6 percent of this year’s budget — is a look-ahead estimate based on revenue and spending trends, broader economic conditions and how much money the city is banking on from the state and federal government.

Exactly how Johnson wants to fill it won’t be revealed until he introduces his budget proposal in mid-October. That will kick off weekslong department briefings and private negotiations with the City Council to reach 26 votes needed to pass it.

Johnson on Friday to the same guns he’s brandished in previous budget cycles, saying his “ultimate goal is to challenge those with means to contribute more to the vitality of the city,” and that the city could make cuts “without necessarily laying people off.”

He faces legal and political barriers to that goal to tax the rich. The mayor has been pressing state officials to expand the city’s taxing powers to little avail.

His own finance team also publicly cast doubt on a progressive group’s recent pitch to create a new payroll tax on high-paid workers at large companies. Limits on cities’ ability to tax income “impacts the ability to do anything like that,” Chief Financial Officer Jill Jaworski told a City Club audience earlier this month.

Asked about the barriers to passage of progressive revenues Friday, the mayor said, “I don’t really give it much thought to where the opposition is coming from. That focus is really about speaking in the affirmative.”

The city’s Law Department is studying whether the city can otherwise tax the ultra-rich without the go-ahead from Springfield, he said.

Johnson’s hopes of balancing the budget by taxing ultra-wealthy residents and corporations seems unrealistic for this year, progressive Ald. Daniel La Spata said Friday, since the city is unlikely to get needed state permission in time.

“You can’t do that without state partnership. You simply and 100% can’t, and I’m not clear that the work is being done to build that partnership right now,” he said.

The deficit figure is “jarring,” but La Spata said there are still options for aldermen to address it. “If you don’t have one $500 million idea, what you need is twenty $25 million ideas.”

In the coming weeks, a hand picked budget working group is expected to release its report with short-term ideas for cuts and new revenues. Its members have deliberated with the help of hired guns from the audit firm Ernst & Young.

Though its members are subject to confidentiality agreements, early city estimates of alternate revenues have trickled out. They include increases to garbage collection rates, liquor taxes, or new online sports betting charges.

Aldermen broadly concede that any new revenue would have to be paired with cuts to satisfy constituents, but most have made clear a property tax hike would be unacceptable.

“All 50 aldermen, I would say they’re not a single alderman that wants to go for a property tax increase,” Northwest Side Ald. Nick Sposato, 38th, affirmed Friday.

He’s been a consistent yes vote to recent mayoral budget proposals. If Johnson did ultimately propose a property tax hike, Sposato said he’s “willing to listen to everything and figure out what we could do.”

Johnson publicly disavowed a 2026 property tax increase last month, after his attempt to hike property taxes for 2025 resoundingly failed.

This time last year, Johnson forecast a $982.4 million gap and a $223 million deficit to fill by the end of 2024. Those drastic sums required drastic measures, he argued, proposing a $300 million property tax hike soon after.

Aldermen refused, ultimately approving a budget that raised several other smaller taxes and fees and eliminated hundreds of vacancies. The city otherwise avoided layoffs and furloughs for city employees, a red line for Johnson, a former union organizer.

The city largely exhausted one-time funding sources last year. One of its main reserve funds was drained at the end of 2024 and the city already moved to phase out pandemic relief funded programs, using that money to plug this year’s budget hole instead.

The city worked throughout this year to cut other costs. Budget Director Annette Guzman said Friday that an ongoing hiring freeze should save about $80 to $100 million, and that trims to other contracted services, materials and projects saved another $107 million. Those figures are already factored into year-end estimates.

The Chicago Board of Education’s continued refusal to pick up part of a pension payment for non-teacher staff is a continued stressor. On Thursday night, the board passed its $10.2 billion budget proposal, which only included a $175 million pension reimbursement to the city if it received more money from the city or state.

Johnson’s finance team has long argued CPS should help pick up the annual payment, citing rising CPS non-teacher costs at the fund. Those workers make up 63% of active participants in the pension fund that covers municipal employees, the city said.

Debt and pension costs are one of the main drivers of Chicago’s continued deficits. The city expects to make a $2.84 billion pension contribution next year and nearly $3 billion the year after, when new benefits for police and firefighters will kick in.

Thanks to those new state-mandated benefits, the city revealed Friday that plans to make even larger supplemental payments — on top of what is required by law — than it originally planned to keep its four pension funds afloat. The new police and fire benefits will add between $130 and $151 million to the city’s planned extra payments between 2027 and 2030.

Personnel costs at the city are going up overall and will make up the biggest share of expenditure increases next year, according to the forecast. Certain healthcare costs are expected to double and union-negotiated wages continue to climb.

In all, personnel costs are projected to go up by $629 million next year, reaching $4.1 billion. Back pay for the long-awaited contract with firefighters is expected to cost more than $200 million, city officials said Friday.

Aldermen also must decide by October whether to vote to ask the state to continue collecting and remitting a 1% tax on groceries that the governor eliminated in his 2025 budget. Without it, Johnson’s team estimates the city would miss out on roughly $80 million in revenues. His forecast counts on aldermen approving it, but only after the deadline, meaning the city will lose out on six months of collections.

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Tribune reporters Alice Yin and Jake Sheridan contributed.

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