2022 Budget Recaps:

Budget Review Post Number One: August 12, 2021 The City of Chicago’s 2021 Revenues Greatly Exceed 2021 Budget Expectations

On Wednesday, August 11, the City of Chicago issued its 2022 Budget Forecast, once again projecting a massive budget shortfall. The goal of this essay is to discuss the City’s Budget assumptions with you, because every day Alderman La Spata and the 1st Ward Office hear about your concerns related to the efficiency and responsiveness of City Services, and Alderman La Spata wants to strongly advocate for an expansion of services – rather than cuts. You deserve efficient and quality services from the City, and building an effective budget is the way to do that. The shift in the City’s own revenue estimates between last year’s Budget and the 2022 Budget not only suggest that this course of action is possible, but plausible.

This essay will dive into the numbers here, but you don’t have to take my word for it: you can access all of the City’s Budget documents at the City’s website. Page citations are included so you can follow along.

First and foremost, it must be noted that for the 2021 Budget, the City targeted revenues of $4,037,000,000. By year end, the City is actually estimated to collect $4,215,200,000 in revenues, which is a substantial increase beyond the 2021 Budget targets (the City exceeded its budgeted collections by 4 percent!) (2022 Budget PDF page 18).

If we dig deeper into the underlying budget assumptions, the picture in Chicago looks even better. According to the City of Chicago Budget Forecasts, the City of Chicago exceeded their projected 2021 year-end corporate fund income estimates by more than $680,000,000. On PDF page 19 of the 2021 Budget Forecast, the City of Chicago projected the following income statement to the corporate fund, for 2021, with their actual figure in parentheses from PDF page 21 of the 2022 Budget Forecast.

--> $1,480,000,000 in local tax revenue ($1,527,400,000 actual. A surplus of $47,400,000)

--> $493,800,000 in proceeds and transfers in ($695,800,000 actual. A surplus of $202,000,000)

--> $398,100,000 in intergovernmental revenue ($580,1000,000 actual. A surplus of $182,000,000)

--> $1,183,100,000 in local non-tax revenue ($1,300,900,000 actual. A surplus of $117,800,000)

--> $81,000,000 in prior-year assigned and unassigned available resources ($111,000,000 actual. A surplus of $30,000,000)

Why does this matter? These are the figures that the City pf Chicago uses to establish their budget assumptions, and in 2021 they used these assumptions to develop a budget proposal that targeted more than $4 billion in corporate fund expenditures. The City of Chicago, in 2022, is projecting another massive budget gap. Reportedly, the City expects to encounter a budget gap that is larger than $700,000,000 in 2022. However, it is worth noting that according to the 2022 Budget Forecast (2022 PDF page 21), the City of Chicago’s estimated income statement already exceeds its estimates from 2021 (2021 PDF page 19).

For 2022, comparing the previous budget’s estimates for the corporate fund with the new estimates, the City of Chicago’s estimates already suggest an increase of expected revenues by $406,800,000. Once again, the previous estimate is listed first, with the new estimate in parentheses (2021 PDF page 19, 2022 PDF page 21):

--> $1,683,500,000 in local tax revenue previously estimated for 2022 ($1,758,900,000 new estimate. A surplus of $75,400,000)

--> $488,600,000 in proceeds and transfers in previously estimated for 2022 ($598,200,000 new estimate. A surplus of $109,600,000)

--> $438,000,000 in intergovernmental revenue previously estimated for 2022 ($528,200,000 new estimate. A surplus of $90,200,000)

--> $1,190,500,000 in local non-tax revenue previously estimated for 2022 ($1,279,100,000 new estimate. A surplus of $88,600,000)

--> $0 in prior year assigned and unassigned available resources previously estimated for 2022 ($43,000,000 new estimate. A surplus of $43,000,000)

Why does this matter? Getting these projections right means that the City may or may not need to address a budget shortfall of a certain size. These assumptions also matter because if one simply assumes a certain status quo in how the City collects revenues, the general revenue outlook remains relatively stable over time.

Granted, the COVID-19 pandemic made it difficult to understand how 2021 might “look”, but comparing the 2019 and 2020 Budgets with the revenue collections in 2021 illuminates just how close 2021 was to a “normal” year for the City. The following lines are from 2022 PDF page 21, compared to 2020 budget PDF page 40):

--> In the 2019 Budget, Local Tax Revenue totaled $1,662,700,000; the 2022 Budget forecast suggests that in 2021 local tax revenue will be $1,527,400,000. (A deficit of $135 million)

--> In the 2019 Budget, Proceeds and Transfers In totaled $604,600,000; the 2022 Budget forecast suggests that in 2021 these proceeds and transfers will be $695,800,000. (A surplus of $91 million)

--> In the 2019 Budget, Intergovernmental Revenue totaled $398,200,000; the 2022 Budget forecast suggests that in 2021 these intergovernmental revenue will be $528,200,000. (A surplus of $130 million)

--> In the 2019 Budget, Local Non-Tax Revenue totaled $1,074,300,000; the 2022 Budget forecast suggests that in 2021 these local non-tax revenue will be $1,300,900,000. (A surplus of $226 million)

--> In the 2019 Budget, Net Current Assets totaled $76,000,000; the 2022 Budget forecast suggests that in 2021 these unassigned available resources will be $111,000,000. (A surplus of $35 million)

If the City assumed that 2021 revenue structures would look like 2019 revenue structures within the Corporate Fund, there is not reason to believe that such a projection would have been far from the mark. The actual performance of the 2021 Corporate Fund revenue sources grew by approximately 9% (nine percent). Unfortunately, the 2021 Budget projected a loss of 4% (four percent) from the 2019 revenue levels, which suggests an assumption about a substantial negative outlook for the City.

For special revenue funds, the following picture emerges (2022 PDF pages 26-27, 2020 PDF pages 46 and 49):

--> In the 2019 Budget, the Vehicle Tax Fund was $241,100,000; the 2022 Budget forecast suggests that in 2021 the Vehicle Tax Fund will collect $200,900,000.

--> In the 2019 Budget, the Motor Fuel Tax Fund was $65,700,000; the 2022 Budget forecast suggests that in 2021 the Motor Vehicle Tax Fund will collect $108,500,000.

--> In the 2019 Budget, the Emergency Communication Fund was $134,200,000; the 2022 Budget forecast suggests that in 2021, the Emergency Communications Fund will collect $158,800,000.

--> In the 2019 Budget, Special Events and Municipal Hotel Operators’ Occupation Tax Fund was $53,300,000; the 2022 Budget suggests that in 2021, this fund will collect $18,900,000.

--> In the 2019 Budget, the O’Hare Airport Fund was $1,328,600,000; the 2022 budget suggests that in 2021 this fund will collect $1,521,900,000.

--> In the 2019 Budget, the Midway Airport Fund was $318,600,000; the 2022 budget suggests that in 2021, this fund will collect $336,600,000.

--> In the 2019 Budget, the Sewer Fund was $373,900,000; the 2022 budget suggests that in 2021, this fund will collect $370,100,000.

--> In the 2019 Budget, the Water Fund was $762,900,000; the 2022 Budget suggests that in 2021, this fund will collect $770,400,000.

Once again, in most cases these Special Revenue and Enterprise Funds have revenue collections in 2021 that do not look substantially different from 2019. Unfortunately, here the 2021 Budget projected more conservative revenue collections for the Motor Tax Vehicle Fund, the Vehicle Tax Fund, the Special Events and Municipal Hotel Operators’ Occupation Tax Fund, the Water Fund, the Sewer Fund, and both Airport Funds. In this case, the negative outlook for the City proceeded to the 2021 projections in a manner that resulted in conservative budget assumptions, producing a substantial shortfall.

What is particularly puzzling about these 2021 estimates is that the City of Chicago is greatly exceeding its revenue projections published in Budget Forecasts, to the point that the City of Chicago in 2021 greatly exceeded its worst case scenario by more than $450,000,000!

For example, on page 23 of last year’s Budget Forecast, the best case scenario for the City of Chicago budget estimated a revenue gap of more than $1,190,100,000 in 2022; now, the best case scenario projects a revenue gap of approximately $733,000,000 (2022 PDF page 25).

These numbers suggest that the City is projecting a budget deficit on assumptions that are extremely cautious, which is particularly puzzling based on the exceptional performance the City’s revenue collection exhibited versus its previously published budget assumptions.

Alderman La Spata will continue to work with the City to advocate for expanded services and valuable social support programs for our residents most in need. Budget season is starting now, so please don’t hesitate to reach out with your priorities and comments to zoning@the1stward.com.