A disciplined bloc of conservative and moderate members muscled their alternative revenue package through the City Council on Friday — minus Mayor Brandon Johnson’s corporate head tax — with five votes shy of the veto-proof majority they would need to override a mayoral veto.
The final vote was 29 to 19.
Prior to the final vote, mayoral allies introduced an alternative plan that would restore the already-rejected head tax, fully-funded an advance pension payment, eliminated a $90 million debt collection plan that Johnson has branded “immoral” and “not feasible” with a mix of other revenues, including a packaging fee. They tried to refer it to the Finance Committee, but it was shunted off to the Rules Committee instead.
The Council will meet again Saturday, presumably to take a final vote on the $16.6 billion 2026 budget and authorize the Johnson administration to borrow $1.8 billion for capital improvement projects, retroactive pay raises for firefighters and paramedics and massive police settlements and authorize the refinancing of $1 billion in existing city debt at reduced interest rates.
After that, the next move will be Johnson’s.
He must decide whether to veto a budget he still believes is $165 million out of balance and would set Chicago up for a mid-year budget shortfall that would require layoffs, service cuts, tax increases or a painful mix of those three.
“If I find this budget to be irresponsible and unbalanced, then it leaves me with very few options,” Johnson said, keeping Chicago guessing.
Johnson has vowed repeatedly to do “whatever it takes” to avoid an unprecedented shutdown of city government that Chicago would face if the Dec. 30 deadline comes and goes without Council approval of a city budget.
But, he has also condemned the plan to sell $1 billion in outstanding city debt to collection agencies.
Before he could take office, Johnson was forced to write a $3,357.04 check for unpaid water and sewer bills that were nearly eight months late. The last thing he wants to do is unleash predatory collection agencies to dun scofflaws like him into submission.
Asked Thursday whether the debt collection plan he views as “immoral” was a “deal-breaker” for him, Johnson responded with an emphatic, “Yes. Especially if there is another way…I’m gonna push hard for a better way to balance this budget…I’m encouraging them to look at other means of revenue. We have placed some ideas on the table.”
The alternative revenue plan approved Friday embraces Johnson’s proposed 15% tax on cloud computing, but includes no corporate head tax and no increase in garbage fees.
It raises property taxes by $9 million for libraries and relies on $8.7 million in annual revenue by raising Chicago’s plastic bag tax by a nickel — to 15 cents a bag; $6.8 million by licensing newly legalized video gambling terminals and $6 million by taxing off-premise liquor sales.
The proposed liquor tax was cut in half — from 3% to 1.5% — to soften opposition from the hospitality industry.
An enlarged Downtown congestion fee zone is expected to raise $26 million, even after opposition alderpersons canceled plans to apply the city’s 10.25% amusement tax to rides on Uber and Lyft.
The proposal to lift the city’s ban on video gambling assumes that 80% of the 3,300 eligible establishments with off-premise liquor licenses will apply.
The package also includes $29.3 million in revenue by selling advertising on bridge houses, city light poles and city fleet vehicles, including street sweepers and snowplows.
The 15% tax on cloud computing and equipment leases — up from just 9% a year ago — is the big moneymaker at $416 million a year. It will fall heavily on business, but will be passed along to consumers, including Netflix customers.
An advanced pension payment that Johnson cut in half would be fully restored to $260 million. That $139.9 million increase would be bankrolled, in part, by finding $46.6 million in budget “efficiencies.”
The opposition group had hoped to scrap the mayor’s plan for a five-year, $166 million loan to cover retroactive pay raises for firefighters and paramedics, but ran out of money to pay for that decision.
Finance Chair Pat Dowell (3rd), whose opposition to the head tax triggered the Council mutiny, was the only alderperson to speak on the City Council floor to, as she put it, “put a fine point on the moment that we’re in today.”
Dowell noted that Chicago’s precarious financial position is “at a critical juncture,” adding, “We have emerged today with a budget plan that protects programs which are vital to those most in need while setting us on a right path towards a stronger fiscal future.”
She made it a point to thank her colleagues who “dedicated hundreds of hours and time” to craft a “financially responsible revenue ordinance that does not sacrifice economic growth or place a burden on our most vulnerable citizens to close this $1.2 billion gap.”
Now that Friday’s show of force has proven they have 29 votes, renegade alderpersons believe they would pick up another five votes in the unlikely event that Johnson vetoes the budget.
During a marathon Budget Committee hearing earlier this week, Chief Financial Officer Jill Jaworski was asked what would be worse for Chicago’s already-reduced bond rating now just two notches above junk status: an unbalanced budget or a government shutdown. Without hesitation, Jaworski said a shutdown would be worse. The mayor agreed.
“I’m gonna…use every tool that’s available to me to ensure that we don’t do that because it’s not just severe ramifications around elected leaders. We’re talking about the consequence that it could have on everyday people,” he said.
