City of Chicago Projects $1.2 Billion Gap In 2021 Fiscal Year Budget
Economic impacts from the COVID-19 pandemic also resulted in a $799 million mid-year budget shortfall for 2020
CHICAGO – Mayor Lori E. Lightfoot today was joined by the City’s Budget Director Susie Park, Chief Financial Officer Jennie Huang Bennett and Comptroller Reshma Soni to release the 2021 Budget Forecast that projects a $1.2 billion budget gap for fiscal year 2021. The budget gap, the largest in the City’s history, is largely attributed to the devastating and continued impacts of the COVID-19 pandemic on revenues which has caused widespread financial disruption to many sectors of Chicago’s economy. As part of the budget public engagement framework, the City has also released the 2021 Budget Forecast Summary, an overview that provides a transparent depiction of the impacts of COVID-19 on the City’s finances.
“The economic destruction caused by COVID-19 has 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,” said Mayor Lightfoot. “As the pandemic has continued for months, compromising the health and well-being of people all across the country, it is clear that without another round of federal stimulus funding, Chicago, like many other cities, will be facing a set of very hard choices. That’s why it remains vitally important for the community to stay involved in this inclusive process so that your voices are heard.”
The financial impacts of the COVID-19 pandemic on our local economy have been widespread, causing a decline in consumer spending and a 10 percent reduction in Chicago metro GDP in the second quarter from the same period the prior year. These drastic changes in our economic conditions have contributed to the expansion of the City’s 2020 mid-year budget shortfall, growing to $798 million from an earlier estimate. The City has made progress in addressing this shortfall by implementing a hiring slowdown, leveraging CARES Act funding for eligible COVID-19 related expenses, finding service efficiencies, and pursuing additional debt refinancing for an additional $100 million in FY2020 relief on top of the incremental $100 million over budget achieved in the January 2020 refinancing.
“There’s no question that this will be one of the most challenging budgets the City has ever faced. We are going to continue to drive departmental efficiencies and review workforce reforms with our personnel as they account for more than 70 percent of our total Corporate Fund expenditures,” said Budget Director Susie Park. “As we begin to explore all available options, we are committed to remaining transparent throughout this process by keeping the community engaged every step of the way while also holding true to our values of equity and inclusion that unite us as a city.”
“The City made significant strides in the 2020 budget gap in walking the path toward structural balance. Those structural solutions have prevented this budget gap from being even worse than it is,” said Chief Financial Officer Jennie Huang Bennett. “As a result of that work, nearly all of the 2020 shortfall and $783 million of the 2021 budget gap is purely due to COVID-19 related revenue loss. This is a difficulty that every city and state across the country is facing and why it is critical for the federal government to provide additional stimulus. The lack of this funding will only delay the speed of our economic recovery.”
Last year, the City faced an historic $838 million budget deficit. The deficit was addressed with over $500 million in structural solutions, totaling the largest amount of structural solutions since 2012. For the first time, the City also climbed the ramp to fund Police and Fire pensions to actuarial funding levels. Through hard work and using an equity lens, the City achieved a balanced budget that included targeted new revenues, government efficiencies and critical neighborhood investments without imposing a significant property tax increase.
Further, the long-term fiscal goals pursued by Mayor Lightfoot laid the foundation to begin discussions about finally bringing a casino to Chicago. For the first time in decades, the City secured authorization at tax rates that would be financially viable for a casino operator. On August 27th, the City issued a request for information to casino industry stakeholders to solicit feedback on key considerations related to a casino. This represents the next step in the planning process for finally bringing a casino to Chicago. The revenues generated from a casino would be dedicated toward Police and Fire pension funds, relieving pressure on the City’s general operating fund.
While the 2020 budget set the City on a path to structural balance, the unprecedented pandemic created new challenges for the City to address. During the early stages of the pandemic outbreak, the Lightfoot Administration moved to mitigate some of the economic and social impacts caused by COVID-19 by implementing a number of initiatives to support small businesses, employees and residents including the Small Business Resiliency Fund loan program to help fill the gap for under-banked or immigrant-owned businesses, the Microbusiness Grant Program for small businesses with less than four employees, funding for renters struggling to pay the their rent, financial assistance for small businesses or not-for-profits that have experienced economic distress and significant losses due to COVID-19 or from damage and theft, and free internet to eligible CPS families through the Chicago Connected program. The City also deferred a variety of payments due to the City and instituted a penalty relief package to assist residents and businesses struggling to pay their debt.
“Throughout this health crisis, the City has taken steps to lessen the immediate financial burden felt by working-class families and businesses, such as temporarily suspending debt collection efforts and extending due dates for fines and fees, utility bills and other business taxes that have been significantly impacted due to COVID-19,” said Comptroller Reshma Soni. “The City remains committed to long-term solutions for addressing the inequitable impact of debt, while balancing the need for continued enforcement.”
The 2021 budget community engagement and public education process began last week when the City announced “Budget Week”, a weeklong series of virtual townhall meetings livestreamed on Facebook, and launched an interactive website where residents can submit questions about budget issues they care most about. Every day this week, Budget Director Park will sit down with key City department leaders to review the critical functions of each department, update the public on key issues facing the City’s finances and review the questions submitted by residents through the website portal.
Airing from 6:00pm-7:00pm, the Budget Week’s online Facebook Live schedule is as follows:
State of the Budget with Susie Park, Budget Director; Jennie Huang Bennett, Chief Financial Officer; and Alderman Pat Dowell, Chairman of the City Council Committee on the Budget and Government Operations
Public Safety with Susan Lee, Deputy Mayor of Public Safety; Deputy Superintendent Barbara West, Chicago Police Department; and Executive Director Annastasia Walker, Office of Public Safety Administration
Human Services with 1st Deputy Commissioner Brandie Knazze, Department of Family and Support Services; Commissioner Dr. Allison Arwady, Department of Public Health; and Commissioner Rachel Arfa, Mayor’s Office for People with Disabilities
Infrastructure with Commissioner Randy Conner, Department of Water Management; Commissioner John Tully, Department of Streets and Sanitation; and Commissioner Gia Biagi, Department of Transportation
Neighborhood and Economic Development with Commissioner Maurice Cox, Department of Planning and Development; Commissioner Marisa Novara, Department of Housing; and Commissioner Rosa Escareno, Department of Business Affairs and Consumer Protection
To build on the framework for the public engagement phase of the 2021 budget, today the City launched an online survey at http://chi.gov/budgetsurvey which asks participants about City services they most value. Additionally, this year the City is introducing the 2021 Budget Community Round Table series, a grassroots effort to gather community feedback from residents about their budgetary spending priorities, with a focus on engaging youth and the Latinx and African American communities. The City is seeking Budget Ambassadors to organize and facilitate one-hour virtual or in-person focus groups with up to 10 community members from September 7-20 to gather feedback about the needs and values most important to residents.
Efforts to expand the 2021 budget engagement process will continue over the next several weeks. Residents can visit www.chicago.gov/budgetdocuments to view a copy of the 2021 Budget Forecast or download the Forecast Summary. Chicagoans interested in the budgeting process can also sign up to host a community focus group, submit a question about an important issue for discussion at the Facebook Live virtual town hall, or take the online survey by visiting www.chicago.gov/2021budget.
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