Chicago is the country’s third largest city. It has 2.7 million residents. To provide the services that nearly three million people require is expensive. The Windy City budget for 2026 was $16.6 billion. Finding the money to fund that budget took an extra effort. As often happens, Chicago came up a bit short, $1.2 billion to be exact. To bridge that gap, some new taxes were added, funds were diverted from one account to another, and the budget authorized $1.8 billion in borrowing.
The process of approving the 2026 budget was highly contentious. Mayor Brandon Johnson and the City Council could not agree on the budget. They don’t agree on much. In a first, the City Council rejected the mayor’s budget and passed its own instead. The budget was not popular. New taxes and government borrowing are never popular, but failing to cut costs really hit a nerve. Critics said the budget failed to follow any of the recommendations of Ernst & Young, which gave the city a list of ways to save money by reducing expenses. Neither the mayor nor the City Council took the recommendations seriously.
The battle over the budget for 2027 is already raging. The Ernst & Young report still hangs in the air, but is being ignored by those constructing the proposed fiscal plan. Instead, the mayor and the City Council are separately searching for new sources of revenue. The City Council wants to legalize slot machines within the city. State law permits video lottery terminals in Illinois for any municipality that opts in with a city ordinance. The Council sees slot machines as a major source of new revenue and therefore necessary.
Mayor Johnson is very vocal in his opposition. He has a list of new taxes; last year, 11 new taxes were on the list. Looking for suggestions, he also conducted a series of consultations with neighborhood groups. Slot machines are not on his list, which might be because Chicago signed an agreement with Bally’s that gives the casino corporation the exclusive right to operate gaming within the city. However, Johnson’s resistance appears to be more political; he and the Council simply have no common ground. Something must happen: By law, a budget has to be approved.
The dilemma is not unique to Chicago. Every government must produce a budget every year and the budgets have to balance. In other words, expenditures cannot exceed revenues. There are structural problems in our government-funding system. For example, in Chicago the costs of police, fire protection, transportation, infrastructure, and education inflate every year and the public-retirement-fund liability, already onerous, grows. It is a common problem for cities and states with civil-service-employee retirement funds. The cost goes up regularly as the number of retired employees grows faster than revenue and the number who leave the system. For Chicago, the liability for four basic unions is estimated by the Chicago Sun-Times to be $36 billion and with a separate teachers’ fund, the liability is $51 billion. The city’s revenues will fall short of the expenses again in 2027, probably $780 million short.
With that kind of pressure, it is not surprising that Chicago is entertaining violating its agreement with Bally’s. Bally’s is old news; its upfront fees were part of another budget and the temporary casino is falling short of expectation. In the last 12 months, Chicago has received $17.6 million from Bally’s. The city expects three or four times that amount from the permanent facility. The opening of the permanent is still a moving target, but it will not be in September as originally planned. It is projected for early 2027. It will add to the city’s resources, but that amount has already been penciled into the numbers. The city needs more, much more.
The City Council has a partial solution: legalize slot machines. At the current tax rate, Chicago could anticipate $3,500 a year per machine in annual tax revenue. The state has nearly 50,000 games and Chicago might be able to support a fourth or fifth of that and get $35 million-$50 million a year. That would be good for a year, but what about the year after and the year after that? Bally’s is going to fight legalizing slot machines in the city. It has offered to put slots in the airports, as it is authorized to do by the initial legislation. Again, that would help for a year or two.
In 2030 or some other year in the future, slot machines will again be written into the city’s budget. For years in Illinois, gaming has been the low hanging fruit, an easy target. In time, the opportunities to exploit gaming will have been used, but the need for new revenues will persist. Eventually, the Ernst & Young report will be read, but the time will come when the cuts in expenses will not be enough either. The budget of the City of Chicago is a cavernous pit that can never be filled. But then, so is every other public budget. There are two elephants in the room; one is the retirement system and the other the service we expect from government. Those are the issues we will have to address eventually.
