Facing a nearly $1.2 billion budget gap, budgetmakers in Mayor Brandon Johnson’s administration have been dogged by a question: Why can’t the city cut its spending bloat before it taxes residents to close the gap?

Chicago’s budget was about $10.7 billion in 2019, the year before the COVID-19 pandemic scrambled the city’s economy and its government. Within six years, combined spending rocketed to $17.3 billion — thanks in part to an unprecedented burst of funding the city received through the 2021 American Rescue Plan Act (ARPA) — outpacing the rate of inflation.

“The message to the mayor and his team has been very simple: if you want us to consider new revenue streams … you need to show some good faith to the taxpayer that you’re going to tighten the belt,” Ald. Brendan Reilly (42nd) said in an interview Tuesday. “And this argument that you can’t tighten your belt anymore when the city budget has ballooned during this administration and the previous doesn’t pass the smell test.”

Specifically, Reilly said, Johnson needs to “let go of program expansion and hiring that was done with federal bailout ARPA money that’s no longer available.” 

But trimming city spending faces at least as many logistical and political hurdles as any push to hike taxes, according to an Illinois Answers Project review of annual spending appropriations and interviews with analysts, researchers and both current and former city finance officials. 

City leaders and their critics both struggle to identify permanent employee positions or other recurring expenses that were set in motion by the Chicago Recovery Plan, the city’s roadmap for its spending of ARPA dollars, and that now look ripe for cuts. The vast majority of the federal money replaced lost revenue during the pandemic or paid for grants and contracts that have already expired.

Most of the city’s $17 billion budget is made up of special funds city leaders have little control over, and that city taxpayers don’t pay into.

By far the largest driver of growth in the city’s Corporate Fund — its central operating budget that relies on local taxes for revenue — has been a steady, legally mandated ramp-up of annual payments into the city’s ailing pension systems.

Also feeding the city’s pernicious spending growth is a tangle of union-negotiated contracts that mandate regular pay hikes for city employees, with police receiving some of the most generous steps thanks to a 2023 bargaining agreement.

In the meantime, by one key metric, city government has shrunk. Chicago has more than 500 fewer employees on its payroll in 2025 than it did in 2019.

It all leaves city leaders with little wiggle room for cuts, unless they’re prepared to hamper core city services or fundamentally remake sectors of city government — including the police and fire departments, according to Justin Marlowe, a professor at the University of Chicago’s Harris School of Public Policy who leads the school’s Center for Municipal Finance.

“You don’t have a lot of room to maneuver, even if there was a commitment to finding all sorts of efficiencies and rolling back spending,” Marlowe said. “You can’t do that, short of a very different political context than the one that we live in.”

Outside revenues drive budget growth

Chicago’s Corporate Fund, the primary vehicle for the city’s tax collection and operating expenses which pays the salaries of most city employees, made up less than one-third of the city’s $17.3 billion operating budget in 2025. The rest is a hodgepodge of specialized funds whose spending is legally restricted, sourced from outside grants, or both.

Together, those peripheral funds accounted for the majority of growth in the city’s overall budget from 2019 to 2025.

Among the biggest increases came in the city’s two airport funds, which furnish the more than 1,300 employees who staff and maintain O’Hare and Midway international airports. The two funds, which are sustained by a mix of airport parking fees and runway fees paid by airlines, grew by nearly $700 million for an approximately 42% increase from 2019 to 2025. Staffing and capital costs have both grown amid construction and service expansion at both airports, according to city aviation officials.

The city’s water and sewer funds account for another $234 million increase during that period as labor and capital costs rise for underground work. The funds draw directly from property owners’ water bills and fund the maintenance of the city’s underground sewer system.

And the Motor Fuel Tax Fund, which draws on gasoline taxes and is constitutionally required to be spent on transportation-related costs like road repairs, has more than doubled in size in the past six years amid spiking gas prices.

Specialized funds also earmark grants that the city receives from the state and federal government, or from private donors. For the first time last year, city budget officials grouped all state-backed funding sources into a nearly $1.1 billion State Grand Fund and did the same for more than $2.7 billion in federal money.

Johnson’s finance team is banking on less support from the federal government in 2026 as President Donald Trump’s administration rescinds or discontinues funding. The White House budget office earlier this month announced a pause on $2.1 billion in previously approved funds for the long-planned CTA Red Line extension.

As the picture in Washington rapidly shifts, budget officials argue the separate city funds show they planned far in advance for ARPA dollars to expire.

The Corporate Fund has also grown considerably in recent years, ballooning from about $3.8 billion in 2019 to $5.6 billion in 2025. But the increase has been driven almost exclusively by two factors over which city leaders have little control: pension costs and union-negotiated salary hikes.

‘Making good on past obligations’

No line item has contributed more to the multibillion-dollar growth of the Corporate Fund than the city’s four insatiable pension funds, which have been funded at less than 30% of their  obligations for more than a decade.

After the 2008 financial crisis pulled back the curtain on decades of underfunding for city employee retirement payouts, and former Mayor Rahm Emanuel’s subsequent push to roll back pension benefits was ruled unconstitutional by the Illinois Supreme Court, a 2016 state law set a schedule for the city to make increasing contributions into its pension funds each year, leading up to a requirement that all the accounts are at least 90% funded by 2058.

Climbing the so-called pension ramp has wrung billions from the city budget, whose revenues haven’t risen nearly fast enough to catch up.

Chicago’s 2014 budget set aside about $478 million in contributions to the pension funds. That number rocketed to more than $1.3 billion in 2019 and $2.9 billion in 2025, according to city budget materials. In 2019, about 63% of the city’s property tax collections went straight to pension contributions, with the rest paying for debt service and the Chicago Public Library system. By 2025, it was 81%.

“So many decision points were made over time that all compound upon each other to get you to a place where the city has a high debt burden and really high pension costs,” said Annie McGowan, policy and research director at the nonprofit Civic Federation. “It’s a huge amount to be paying that then crowds out spending on other things, like health care and human services.”

The city’s path out of its pension hole got even steeper this year, when state lawmakers unanimously approved a bill to boost benefits for Chicago police and firefighters at a projected $750 million cost to city taxpayers.

The city is leaning on property taxes to keep the funds afloat. And the mission of saving pensions from bankruptcy offers little comfort to struggling Chicago homeowners.

“There’s no new services to speak of — there’s nothing visible or tangible that has come” from steadily increasing property taxes, Marlowe said. “That’s just making good on past obligations.”

Salaries up, head counts down

Nearly 90% of city employees are unionized, with collective bargaining agreements locking in annual salary increases that help explain why city personnel spending has ballooned even as its workforce has thinned.

The city’s largest department offers a prime example.

Johnson campaigned on a promise that he would not cut “one penny” from the police department, which accounts for about one-third of Corporate Fund spending. 

In a literal sense, he kept his promise. But at the same time, the department has seen attrition under his watch.

The police department budgeted for 13,742 salaried employees in 2025, down from 14,093 in 2023 and 14,917 in 2019. The reductions came as hundreds of vacant positions were cut and others were transferred to the city’s new Office of Public Safety Administration, which was created in 2020.

However, the department’s budget moved in the opposite direction during that period, growing from about $1.5 billion in 2019 to $1.8 billion in 2025. That increase does not account for growth in police pensions, benefits and overtime, which are often shuffled into other spending categories.

The mayor supercharged police spending in 2023 when he agreed with the police union to unprecedented annual salary increases, including 5% hikes in 2024 and 2025.

“It’s entirely possible to have fewer cops and firefighters, and be paying the ones you have a lot more, and that adding up to a big increase in spending,” Marlowe said. “That’s a recipe for a budget deficit.” 

Ald. Marty Quinn (13th) defended the contract, calling it essential for officer recruitment and retention.

“It’s very expensive right now to get police officers to stay on the job,” said Quinn, whose Southwest Side ward is home to many cops and other city employees. “Our talent was getting poached … our officers, I would say, maybe don’t get paid enough.”

Chicago police officers in 2025 earned a starting salary around $62,000 per year, not including overtime, with an automatic incxrease to $88,170 after a year of service, according to city budget data.

Quinn said he will not support any budget proposal that includes a property tax increase. He instead said the city’s budget should be “right-sized” but did not nominate any departments or programs for the chopping block, expecting more details to emerge as the budget process progresses.

ARPA-backed spending elusive

Quinn, like Reilly, has called on city leaders to end ARPA-funded initiatives before they turn to taxpayers.

“That money is gone now, so something’s got to give,” Reilly said. “And if that means that they have to take back some head count, that’s something we have to look at.”

Reilly did not name any specific programs or employee positions he wants to see cut, but he said city leaders should vet public grants to nonprofit organizations especially closely.

The problem, according to Chicago Budget Director Annette Guzman, is that nearly all the programs propped up by the federal spending have either expired or weaned themselves off the public dollars already.

“We did not hire new personnel on ARPA to do programming that is ongoing,” Guzman said in an interview earlier this year, adding that any call for the city to “right-size” its budget after the gush of COVID relief money “fundamentally is a misrepresentation of how our budget works.”

“ARPA … just like every other grant, sits in a completely different fund … which means it’s very easy to stop a program when grant funds run out,” Guzman said. “So this idea that we somehow ballooned in our Corporate Fund as a result of ARPA is just fundamentally incorrect.”

Much of the City Council remains skeptical that departments have scaled back their ARPA-funded programs, in part because the administration publishes limited data on how the money has been spent.

While the city’s Office of Budget and Management has published every ARPA-backed expenditure on its COVID-19 spending dashboard, it simply ties each item to a category — like “essential services” or “management and administration” — instead of naming a grant recipient or employee position.

Ald. Brian Hopkins (2nd), who is the chairman of the City Council Committee on Public Safety, disagreed with Guzman, saying new recurring spending “exists, it’s just difficult to identify.”

“We have an uncooperative administration that does not want to put those cards on the table — we’re trying to find them,” Hopkins said.

During a preliminary budget hearing on Sept. 9, Ald. Samantha Nugent (39th) asked city budget officials for a list of current city employees whose salaries are funded by ARPA. As of last Thursday, exactly one month later, she had received no response.

“I mean, come on,” Nugent said in an interview last week. “We need all the information we can get in order to make these decisions.”

Illinois Answers Project filed multiple public record requests and sent inquiries to the budget office seeking the list Nugent requested. It has not been provided.

Finance officials in Lightfoot’s administration wrote in a 2023 report that they had designed the city’s $1.9 billion Chicago Recovery Plan roadmap to create between $60 million and $90 million in new recurring expenses that would need to be sustained after the 2026 spending deadline. They did not say which departments or programs would absorb the growth.

Where federal money has gone

About two-thirds of the city’s ARPA spending — some $1.2 billion — fell under the city’s Office of Budget and Management, which used almost the entire sum to keep existing city services running after the pandemic cratered revenues in 2020 and 2021, according to data published by the department. A spokesperson for the city’s budget office wrote in a statement that the department did not create any “permanent new full-time employee positions that are dependent on ARPA funding.”

“Some administrative capacity was funded to support the management and compliance requirements of the program itself, but those were tied directly to the life of the ARPA funds,” department spokesperson LaKesha Gage-Woodard wrote in an email. “Once those federal dollars are fully expended, those temporary positions and contracts conclude as well.”

However, the Chicago Department of Family and Support Services, which captured the second-most federal funds of any city department with more than $312 million in combined programming, established seven new programs with the help of ARPA.

Specifically, the department created a victims’ fund and education programming for domestic violence survivors, and officials developed a series of microgrants related to the “My Chi, My Future” mobile app for students, according to spokesperson Linsey Maughan. Some other functions that had already existed, such as youth employment programs and homelessness services, were scaled up thanks to the federal help.

Other federally funded initiatives, like the department’s guaranteed basic income pilot, have already expired.

“What has been communicated to staff is that these positions were grant funded and time limited,” Maughan said. “Our ability to continue any positions cannot be confirmed until the budget is passed.”

A spokesperson for the Chicago Department of Public Health, which reaped about $75 million in federal dollars, wrote in an email that they are “unable to share any information” on new and recurring expenditures borne out of the Chicago Recovery Plan.

The city’s “Road to Recovery” spending dashboard identifies 14 ARPA-backed programs under the banner of the public health department, spanning categories including vaccinations, mental health programming and antiviolence intervention. The portal shows that spending has tapered off, with more than $33 million spent in 2024 but less than $8 million spent through the first half of 2025.

Just 11% of the public health department’s $690 million budget was furnished by the Corporate Fund in 2025, with the rest from outside grants.

A spokesman for the Chicago Department of Planning and Development, which received $35 million, said the department plans to retain one ARPA-backed employee position next year to oversee “grant program management and small business support.”

As of July, the city reported having obligated about $167 million in federal funding — including $79 million for the budget office, $38 million for the public health department and $34 million for the Department of Family and Support Services — that it had not yet spent. Federal rules required local governments to allocate their ARPA funding by the end of 2024, but they have until December 2026 to spend it.

City leaders have already phased out some programs funded by the feds, but they have more to do, Marlowe said. At the same time, officials and taxpayers should keep an open mind to new programs that have shown they deserve to survive, he added.

“Undoubtedly, rolling back some of the spending that came about during the COVID years is going to be a part of the way forward,” Marlowe said. “There were a lot of things done during that period that were deliberately experimental … Some of that will work, and it will continue, and a lot of it will not work, and it will go away.”

Even downtown Ald. Bill Conway (34th), who has been an outspoken advocate for fiscal restraint at the city level, said not every ARPA-funded initiative should be axed. He noted domestic violence and community violence intervention initiatives “have been valuable.”

“Those are some areas where I think we need to see if we can find a way for those to survive.”