Mayor Brandon Johnson has released the City of Chicago’s 2026 Budget Forecast, outlining a projected $146 million deficit for the end of 2025. The shortfall is attributed to lower-than-expected business tax revenues, the depletion of one-time reserves, and ongoing uncertainty regarding a $175 million pension reimbursement from Chicago Public Schools (CPS).
Looking forward to 2026, the forecast estimates a Corporate Fund gap of $1.15 billion, slightly above last year’s projection. The increase is primarily due to rising personnel costs, including $629 million in wage, healthcare, and pension growth. The report also highlights a continued structural imbalance between recurring revenues and expenditures.
The city’s financial outlook is further complicated by anticipated reductions in federal support. Funding cuts to Medicaid, SNAP, violence prevention programs, and public health initiatives—as well as the expiration of American Rescue Plan funds—are expected to impact Chicago’s budget directly and indirectly.
Pension obligations remain a significant concern. Recent state-level reforms have increased costs for the city without providing new options for raising progressive revenue locally. Since 2023, Chicago has contributed over $820 million in supplemental payments to slow unfunded liability growth. For 2026, the Corporate Fund’s share of pension obligations will total $907.8 million.
Mayor Johnson addressed both challenges and strengths: “This forecast shows both the scale of the challenge before us and the strengths that make Chicago capable of meeting it,” said Mayor Brandon Johnson. “We have one of the most diverse and dynamic economies in the world. Together with City Council, labor, business, and community leaders, we will bring forward a balanced budget that protects essential services, invests in our neighborhoods, and builds a safer and more affordable Chicago.”
The forecast presents three economic scenarios through 2028: a baseline projection with modest growth and persistent inflation; a negative scenario where recession conditions could widen the gap to over $2 billion by 2028; and a positive case where stronger growth narrows it to about $716.4 million by 2028.
Key findings include projected Corporate Fund revenues at $5.26 billion in 2026—a decline of 9.1% from 2025—mainly due to lost one-time resources and ongoing uncertainty around CPS reimbursements. Expenditures are expected to rise by 10.7% to $6.41 billion in 2026.
Budget Director Annette Guzman emphasized transparency: “This forecast makes clear that we cannot rely on one-time resources or uncertain reimbursements to sustain core services,” said Budget Director Annette Guzman. “Our structural challenges are real, and they require durable, recurring solutions. At the same time, Chicago’s economy remains strong, and with transparency and discipline we can chart a path that protects residents, supports our workforce, and strengthens the City’s long-term financial health.”
Officials clarified that this budget forecast serves as an early planning tool rather than an actual spending plan as preparations begin for presenting a balanced budget recommendation later this fall.
For more details or access to the full FY2026 Budget Forecast document visit the Office of Budget and Management website.