November 10, 2025
Published originally in Crain's Chicago Business on Monday, November 10, 2025.
The city of Chicago has reached a fiscal tipping point.
If you think that sounds familiar, you would not be wrong. But this time is different. The current mayoral administration downplays the dire nature of present realities by revisiting the fiscal sins of the city’s past and prioritizing short-term remedies to the city’s deficit rather than doing the hard work of fixing Chicago’s structural problems.
In October, the mayor introduced a fiscally irresponsible proposed FY2026 budget. Alders in unprecedented number and voice immediately pushed back and called for the city to seriously re-examine its spending. Credit rating agencies have taken note, and the city now risks substantially increasing the financial burden placed on future years’ budgets.
There are three fundamental problems with the mayor’s proposed budget:
1) Higher taxes with no real savings. It increases Chicago’s already high tax burden without instituting meaningful efficiencies. In short, the Mayor is asking to skip vegetables and go straight to dessert, doing so in ways that will disincentivize the economic growth needed for a more equitable and sustainable future.
2) Borrowing for operations. Over $250 million in debt is used to cover significant operational costs, the municipal finance equivalent of taking out a payday loan.
3) Cutting advance pension payments. The supplemental contribution falls to $120 million, half of last year’s amount. By the administration’s own rhetoric from last year’s budget season, that is kicking the can down the road and deepening Chicago’s future fiscal peril.
The City Council should reject these proposals. Instead of turning to debt and new taxes, the City should prioritize efficiencies and savings within existing resources.
Here’s the good news: The mayor was forward-thinking enough to commission the premier consulting group Ernst & Young to put together a report on how the city can do more with less. EY identified numerous areas of low-hanging fruit — wasteful city spending that, if corrected, would result in significant savings. Many of the consulting group’s recommendations would not even require the city to reduce service quality or enact layoffs — they’re pure inefficiencies, begging to be fixed.
But here’s the bad news: Despite spending $3 million in taxpayer money on work by EY, the mayor’s proposed budget implements almost none of EY’s recommendations. Indeed, out of the projected $500 million to $1.4 billion in proposed savings, the Civic Federation found only $12 million in structural savings in the FY2026 proposal.
Many of EY’s recommendations could not be implemented in 2026. Some, such as reforming procurement and consolidating the city’s real estate footprint, will take months or even years of planning and staged implementation before their benefits can be realized. However, the proposed budget is distressingly vague about whether the City intends to begin work on these long-term goals, leaving Chicago poised to face the same crisis next year – with even fewer options available.
In the midst of this controversy, on Nov. 5, the S&P Global credit rating agency revised Chicago’s credit rating outlook from stable to negative. This change reflects S&P’s belief that the city’s financial situation is likely to decline significantly in the coming months. S&P specifically cited the proposed budget as the centerpiece of its concerns, including an unwillingness to address efficiency recommendations and the reduction of the pension payment.
The mayor and the City Council should be grateful to S&P for their courtesy of one final warning before the budget is finalized. Unless Chicago abandons its transactional, short-term mindset toward budgeting, it will be unable to confront its mounting debt and pension costs in the years to come.
The City Council should refuse to vote for a budget that includes the most egregious short-term fixes as flagged by S&P. It should call for the Mayor’s Office to respond to the EY report with a detailed implementation plan for all adoptable recommendations, including timetables, milestone reports, and final deliverables outlined in the Management Ordinance that accompanies the final budget. It should utilize its oversight power to ensure that the city adheres to this plan in 2026 and beyond. And alders should not limit themselves to the proposals brought forward by EY — they should thoroughly review the budget for any possible efficiencies, with an emphasis on sharing the burden among all the city’s stakeholder groups.
Members of the Council have prompted an unprecedented hearing to question EY on the full report this afternoon. EY deserves respectful treatment (and thanks) for having laid a meaningful foundation for a responsible, more structurally balanced budget. However, the Council should press for a detailed understanding of what full implementation of EY’s recommendations would look like and what constitutes a reasonable timeline for each recommendation.
Armed with that information, the Council should immediately call for additional testimony from the mayor’s senior finance team — the budget director, chief financial officer, and comptroller — for questioning about why more of EY’s recommendations are not in the proposed budget.
This is a pivotal moment for Chicago. If the proposed budget passes, it will carry on the financial mismanagement of the city’s past that the mayor has rightly criticized and that will further disincentivize economic growth, spawn higher taxes, and trigger credit downgrades. But if we can leverage this opportunity, Chicago can begin to shake off its legacy burdens and set the stage for a new era of fiscal responsibility.
Published originally in Crain's Chicago Business on Monday, November 10, 2025.