Chicago facing a $1.2 billion budget gap for 2021, largest in its history

Chicago News

CHICAGO —Chicago’s budget shortfall for 2021 is projected to reach $1.2 billion, city officials said Monday, crediting the largest deficit in the city’s history on the economic effects of the coronavirus pandemic.

Measures put in place to prevent the spread of the virus sparked a “seismic disruption” of Chicago’s economy, Mayor Lori Lightfoot said Monday.

Since COVID-19 first came to the city in March, more than 71,000 cases and 2,800 deaths have been reported among Chicago residents. 

As businesses closed and economic activity slowed down, around 900,000 Chicago-area residents filed for unemployment in March, raising the unemployment rate from 3.6 percent in February to 12.6 percent a month later.

While every sector was affected, the hospitality, tourism and personal service industries were particularly devastated. The City estimates Chicago’s GDP decreased by 10 percent from April 1 to June 30 compared to last year.

“In this we are far from alone – like every city and town in every corner of our nation, Chicago has seen economic activity fall and jobless rates surge to levels not seen since the Great Depression,” Lightfoot said. “COVID-19 is the single largest driver of our economic challenges and our city’s budgetary gap.” 

While previous estimates put Chicago’s 2020 budget shortfall closer to $700 million, Lightfoot said factors including a rise in COVID-19 cases and looting led city leaders to increase their estimate to almost $800 million.

The mayor said the city already received $350 million in federal CARES Act funding and $250 million in debt financing, and plans to address the remaining gap through additional borrowing, federal funding and “efficiencies.” 

Looking ahead, Lightfoot said the city is now estimating a $1.2 billion budget gap for 2021.

In a statement, City of Chicago CFO Jennie Huang Bennett said, 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 the reality of a budget deeply impacted by this horrible virus,” Lightfoot said.

WATCH LIVE ABOVE: Chicago Mayor Lori Lightfoot reveals the 2021 budget deficit

Lightfoot called on the federal government to pass another round of stimulus funding to provide relief to local governments like Chicago.

“This is a calamitous financial crisis, bipartisan in its impact, and we need a bipartisan solution – we cannot let the policy makers in Washington fiddle while our country burns,” Lightfoot said.

To close the gap, the mayor is looking to Washington and Springfield for help. She’s also using federal CARES Act money, looking at debt refinancing, spending controls, borrowing and efficiencies.

City layoffs are on the table. In fact, the mayor says she’s already talked to the unions.

“Some painful choices will have to be made, including the likely necessity of personnel reductions,” Lightfoot said. “We have started our conversations with our partners in organized labor.”

However, the mayor resisted calls by protesters in recent weeks to defund the Chicago Police Department.

“We need to both fund communities and add resources for all of our public safety departments,” Lightfoot said.

The mayor is proposing looking at TIF surpluses and a possible computer lease tax for additional funds, but is not yet talking about raising property taxes.

Last year, the mayor won approval for a budget that did not include major property tax hikes. Instead, she hiked fees on Uber and Lyft, parking meters and refinanced debt.

Even as the city faces increasing economic hurdles, Lightfoot said the city should not abandon what she called its values of “equity and inclusion.”

“What this time demands is we come together as neighbors, casting aside the divisive rhetoric and rolling up our sleeves as Chicagoans,” Lightfoot said.

Chicago held a budget town hall on Facebook Live Monday night to answer questions about the shortfall.

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