Mayor Lightfoot Unveils 2023 Budget Proposal
On Wednesday, Mayor Lori Lightfoot unveiled her budget proposal for the 2023 fiscal year.
We continue to see the impact of national and global events on Chicago's economy as we recover from the COVID-19 pandemic. These include historically high inflation rates and the Federal Reserve's efforts to curtail it with rising interest rates, the Russian invasion of Ukraine, and the drying up of federal COVID relief funds.
Despite these challenges, Chicago has seen some growth to help generate revenue, especially in the tourism industry, and with better than anticipated revenue from the Real Estate Transfer Tax. Other industries have been slower to recover, especially as rising prices due to inflation limit individuals' purchasing power. Despite these challenges, the budget forecast projects revenues to increase by $100.3 million in 2023.
The Office of Budget Management currently projects the Corporate Fund to end 2022 with budgeted revenue exceeding expenses by $134 million. Of these, $130 million will be allocated to the Assigned Fund Balance Reserve. This is a reserve that the city maintains to mitigate future risks and preserve financial stability.
The Office of Budget Management projects spending to increase by $228.8 million over the 2022 budget levels. Based on current revenue and expenditure projections, the city faces a better than expected shortfall in 2023, with a $127.9 million estimated budget gap (the smallest gap the city has faced since I took office in 2019). The gap is driven by several factors, including personnel, pension, and contractual costs. Contractual services costs are expected to increase by $53.9 million from 2022. The increase in the expenses is a result of inflationary impacts as well as planned contractual increases for new and expanded information technology services.
To close the gap, Mayor Lori Lightfoot is proposing a 2.5% increase in property taxes. Property tax increases are tied to inflation in the City's Municipal Code. The 2.5% is less than the 7% Consumer Price Index (CPI) rate and half of the 5% CPI cap set forth in the Municipal Code. With the increase in property taxes, the city projects providing an additional $42.7 million in property taxes that will help close the gap and support pension obligations. This amounts to approximately $34 a year for a property valued at $250,000.
A payment of $40 million from the casino also will help reduce the Corporate Fund subsidy as we enter into 2023. Other proposed measures to close the gap include TIF surplus and department efficiencies.
As we enter the 2023 budget season, I will be scrutinizing the line-by-line budget proposal closely to ensure that we are prioritizing the health and safety of Chicagoans.
To view all of the 2023 budget documents, visit the City's website by clicking here.