Brandon Johnson's 2024 Budget Isn't Bad, Actually
An overview of a much better budget than I had expected
While a lot of other hoopla is going on in City Council right now, I instead think it’s worth focusing on some more substantive issues. Given our last few posts here, it shouldn’t come as a surprise that it’s time to talk about the Mayor’s 2024 budget proposal1 I won’t bury the lede: this budget is actually a lot better than I was expecting. It seems pretty grounded in reality and shows a lot more restraint and acknowledgment of the City’s fiscal state than I think a lot of people2 were expecting.
First, some basics. The 2024 budget constitutes a total of $12.3 billion3 in net spending, representing an increase of around 4.1% over last year’s budget. At a high level, it looks a lot like last year’s budget. A four point increase in spending and revenue is pretty close to inflation over the past year, meaning this doesn’t include any new huge taxes or new huge spending programs. Most of the money is coming from the same places as last year, and most of the spending is going to the same places as last year (for reference, compare the below chart to the one here):
While on the margin it includes some new investments in things that Lori Lightfoot probably wouldn’t have done, it keeps a lot of the priorities the same, and nothing is too radical. In general, I think that’s a good thing. Now let’s talk about some specifics.
Another Supplemental Pension Payment
I’ve mentioned this before, but one of the things I liked most in last year’s budget was the $242 million supplemental pension payment the Lightfoot administration included in an effort to chip away more quickly at our unfunded pension gap. Despite Lightfoot signing an executive order on her way out to try and keep this going, it was not at all clear whether these payments could continue under Johnson, and it would’ve struck me as a really easy place for them to cut spending to try and bridge a $538 million budget gap they reported a few months ago. But they didn’t do that! Instead, they’ve included a $307 million supplemental pension payment and indicated a commitment to doing so again through 2026. Stop me if you’ve heard this before, but dealing with our pension liability and debt service is Chicago’s greatest public policy challenge. Keeping these payments going indicates a willingness to acknowledge this that I find promising.
Public Safety Spending
Public Safety spending as a whole is roughly flat (up 1.5%) versus 2023, up to $2.75 billion from $2.71 billion. Notably, the budget also honors Johnson’s campaign promise to cut “not one penny” from the Chicago Police budget, instead increasing police spending by about 2.9% (up to roughly $2 billion). It does shuffle around personnel a little bit, including adding roughly 400 new civilian positions to the CPD in an effort to free up sworn officers for active patrol. It also allocates funds to train and promote an additional 200 detectives to improve homicide clearance rates. Those are both worthwhile initiatives which strike me as a really good way to more efficiently tackle crime. More broadly, I’m also just happy to see that his early investments in tackling the root causes of violence (mental health clinics, nonpolice emergency responders, etc) aren’t crowding out the investments we continue to need in our police.
Some thoughts on Property Taxes
Fulfilling a campaign promise, the budget also doesn’t include any increase to the base property tax levy over last year.4 Notably, this is a reversal from Lightfoot, who had tied increases to the levy to the rate of inflation.5
I’m of two minds about this. On the one hand, I am a property owner who just had to submit my second payment for 2022 taxes to the Cook Country Treasurer’s office, and ouch. I am happy to hear that the city is doing what they can to prevent that check from getting larger next year. On the other hand, if our money has to come from somewhere, having the tax levy increase just to keep up with inflation doesn’t strike me as particularly offensive? The Tribune’s coverage of the budget included a quote from (tipping my hand a bit here) one of my favorite aldermen, Scott Waguespack, which I mostly agree with:
[Waguespack] also criticized Johnson’s decision to undo Lightfoot’s policy of raising property tax levy based on inflation. Not only did ratings agencies support the move, foregoing smaller annual hikes could set up taxpayers for a whopping increase in two or three years, he said.
“When you have that predictability, both as a homeowner or a property owner, you know where you’re going to land,” Waguespack said. “If you don’t have that, you’re really on pins and needles for a couple years, not knowing what that big ticket item is going to be.”
If not tying the property tax levy to inflation results in higher taxes down the road, coupled with fewer ratings agency upgrades which reduce our borrowing cost, this seems like a shortsighted move just to be able to say you didn’t raise taxes.
Things I’m not wild about
There’s a few items in the budget that fall into what I usually think of as “fancy ways we can pretend we’ll pay for stuff.”
As an example, to bridge the budget gap they include $113 million in savings from “Operational Efficiencies.” I understand some of this is intended to come from shifting police department personnel towards more civilians, who are lower cost, but the Tribune also quotes Johnson’s Budget Director as referring to these as “operational efficiencies within our departments as we look towards service deliveries without service cuts,” and I don’t know really know what that means other than “we’re magically going to get better at our jobs.”
Relatedly, the budget also includes $35 million in “Revenue Enforcement Collections” which I take to be a fancy way of saying they’re going to do a better job collecting taxes this year. While that sounds great, I’m pretty skeptical about our ability to miraculously do that on command - especially since last year’s budget included $20 million of revenue enforcement efficiencies too6! I don’t see any other details about exactly how we’re going to magically keep getting Even Better at collecting taxes this year. I’d also note that budgeted headcount allocated to Tax Policy and Administration - the function which actually oversees City tax administration, enforcement, and policy formation - is flat year over year at 57 FTEs7, which doesn’t do a ton to dissuade me from the idea that this $35 million is nonsense.
To be fair, we’re talking about a combined $148 million, or roughly 1% of the total budget, so it’s not exactly a huge deal here - but it’s still something to mention.
More concretely, and what’s gotten a lot of attention is the only $150 million in funds to address the ongoing migrant crisis in Chicago. Given the City is expected to incur somewhere in the ballpark of $300 to $350 million in annual costs to deal with the influx of migrants, that doesn’t seem grounded in reality. Johnson’s rhetoric around this suggests he’s banking on the state and federal government to shoulder more of the financial burden, which sounds great in theory, but is not exactly what I would call a plan.
Refinancing debt
Another $89 million in budget savings comes from refinancing some of the City’s bond debt, which I had originally allocated for my “pretend money” section (Refinancing? In this interest rate environment?) but it turns out this bit is real! A combination of bond ratings upgrades over the past few years, the general shape of the yield curve, and the original bonds not having been callable for many years means we actually do have debt that can still feasibly be refinanced at a lower yield. As an example, here are some Midway Airport bonds the city is in the process of selling now, which will in part refi some issuances from 2013.8
This is obviously a prudent thing to do and I’m glad we’re still able to do it even as rates have climbed. It also underscores an important part of stabilizing our public finances; the more we can do to put ourselves in a good fiscal position, the better we’re viewed by public markets and the lower our cost of borrowing becomes - which in turn translates towards even further improvements to our financial position.
The Bottom Line
This is a pretty good budget and it’s better than I was expecting. It’s mostly based in reality, keeps chipping away at our main fiscal challenges, and doesn’t do anything crazy around new spending or taxes. I would vote for it, and if you live in Chicago, your Alderman should vote for it, too.
If you prefer not to read the full 198 pages but would like some more in-depth information, the Civic Federation’s 2024 budget analysis is well worth a read.
Myself very much included.
You will likely see references to the budget being $16.6 billion in total spending in the news. I’ll take this chance to remind you that includes a lot of grant funding and transfers between funds, and $12.3 billion is the actual figure the City of Chicago is raising and spending this year.
The total levy does increase by $39 million, which is based on recapturing new properties and expiring TIF districts into the city’s tax base, rather than increasing the rate applied to existing property owners.
In other words, holding the levy flat represents a tax cut in real terms, since we’re raising the same amount of nominal dollars from a property base which has (in theory) increased in value in nominal terms year-over-year.
A big thank you to some people who know more than me about muni bonds, who were able to set me straight on this.