The City of Chicago released the Fiscal Year 2026 (FY2026) Budget Forecast on Friday, August 29, projecting a $1.15 billion deficit for the coming year, and a $146 million shortfall by the end of 2025.
The projected FY2026 budget deficit represents roughly a 2.6% increase from the $1.12 billion 2025 forecast.
Breaking down the budget forecast
According to a statement from the city, the 2025 deficit is driven by a combination of limited business tax revenue, depletion of one-time reserves, and instability surrounding the Chicago Public Schools (CPS) $175 million pension fund gap.
Heading into 2026, the city cites rising personnel costs including wages and healthcare, among other structural imbalances as sources of strain.
Additionally, city leaders will have to grapple with mounting funding cuts at the federal level, targeting public health and Medicaid, violence prevention, SNAP benefits, and other programs.
Forecast presents three outcomes for 2028
The 2025 budget forecast presents three economic outcomes for 2028, according to city officials.
In a base scenario, Chicago will see modest growth coupled with continued inflation over the next several years.
A negative scenario could result in recession-like conditions and a $2 billion deficit by 2028, while a positive outcome could mean a reduced shortfall of $716.4 million in the same time period.
Mayor Brandon Johnson will present an official budget recommendation before City Hall this fall, proposing new revenue streams to balance the 2026 deficit.
“This forecast shows both the scale of the challenge before us and the strengths that make Chicago capable of meeting it,” said Mayor Johnson in a statement.
“We have one of the most diverse and dynamic economies in the world. Together with City Council, labor, business, and community leaders, we will bring forward a balanced budget that protects essential services, invests in our neighborhoods, and builds a safer and more affordable Chicago.”