Deep cuts a concern as city hits $1.2B deficit

Mayor Lori Lightfoot

Lightfoot said city will need help from Washington to survive

Crusader Staff Report

Deep cuts in city services remain a concern after Mayor Lori Lightfoot announced a $1.2 billion budget deficit in the city’s 2021 budget.

The budget gap is the largest in Chicago’s history. Lightfoot attributed the deficit 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.

Tax revenues from Chicago’s hotels, restaurants and tourism industries have plummeted since March. The mayor said a decline in consumer spending has also damaged the city’s coffers.

With Chicago’s business district still recovering from widespread looting, Lightfoot said it will be challenging to close the budget gap without a strong economy. Speaking from the Chicago Cultural Center on August 31, Lightfoot said the 2021 budget can be balanced only with replacement revenues from Washington, concessions from city unions and new revenues.

“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 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.”

Last spring, Lightfoot announced that the pandemic blew a $700 million gap in the city’s 2020 budget. That deficit widened as the pandemic continued to decimate the city’s economy.

Lightfoot said 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 2020 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.”

Chicago Chief Financial Officer Jennie Huang Bennett said, “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.

“As a result of that work, nearly all 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, Chicago faced a 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.

“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 when the city 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.

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