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Chicago Faces $700 Million Budget Shortfall Due To Coronavirus

City layoffs and raising property taxes are a last resort as the city tries to fill the gap, Mayor Lori Lightfoot said, but even those “have to remain on the table.”

Mayor Lori Lightfoot at a press conference announcing a statewide stay-in-place order Friday, March 20.
Colin Boyle/ Block Club Chicago
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CHICAGO — Chicago faces a massive budget shortfall due to the coronavirus pandemic that halted collection of fines, business taxes and many other revenue streams for the city for months — and it could get even worse.

Mayor Lori Lightfoot addressed the shortfall Tuesday, saying the city faces an expected $700 million budget gap.

The pandemic and efforts to fight it — like the stay at home order, which shut down many businesses — are to blame for the hole in the city’s budget, as is a sharp dropoff in spending and tax revenue, Lightfoot said.

And the mayor warned the gap could get even wider if the city sees more waves of COVID-19.

“It’s not just the businesses themselves being closed; it’s the workers having little or no income to spend on themselves or take care of their needs and further support other businesses,” Lightfoot said during a press conference. “All of our revenue streams have taken a hit, not just [amusement, hotel, parking and restaurant taxes].

“What we have seen seen is a complete change in consumer behavior as a result of COVID-19, the stay at home order and other things … . People aren’t driving and they’re just not consuming goods and services in the same way.”

Losses from March and April hit $175 million, Lightfoot said, and the city expects to see similar numbers for May.

Lightfoot defended the stay at home order and other measures that were put in place to curb the spread of coronavirus, saying the financial losses are a challenge but it would have been worse if the precautions weren’t taken and, as a result, more people were sickened and killed.

But there are no easy fixes, Lightfoot said: The city is using $100 million in refinancing savings, is trying to delay projects and is rethinking its hiring priorities for 2020 to save money. City layoffs and raising property taxes are a last resort, the mayor said, but even those “have to remain on the table.”

Lightfoot dismissed questions about whether funding from the Police Department could be cut, as other cities have done in the wake of massive protests over the police killing of George Floyd in Minneapolis. Instead, the mayor said the city would invest more in other areas, like mental health resources for residents.

And the city has received federal funding through the CARES Act to help in its battle against coronavirus — but legally, it can only use that money to address the pandemic and not to make up for lost revenue.

“It is not, underscore not, meant to address budget shortfalls,” Lightfoot said.

The city is pressuring the federal government to pass a stimulus package that would provide local governments like Chicago’s with money they need to make up for lost revenue, Lightfoot said.

In the meantime, Lightfoot is asking the City Council’s Budget and Government Operations Committee to approve $1.13 billion in CARES Act funds to be used on programs to help Chicagoans during the pandemic.

That money will be used to make up for some of Chicago’s spending on the pandemic, as Lightfoot said the city has had to spend on quarantine and isolation facilities, testing and on supporting small businesses, among other things.

The city is also spending money to prepare for potential surges of coronavirus cases this summer and fall, especially as people have been gathering more freely in recent weeks, Lightfoot said.

But the city would also use $43 million of the funds to help people with rent and mortgage payments, Lightfoot said.

That’s been a a concern for many Chicagoans, with people wondering how they’ll be able to pay their rent or bills afters months of reduced hours at work or no income at all.

Another $35 million would be used to help small businesses, $4.5 million would go to food assistance, $10 million would go to more mental health services and $10 million would go to more violence prevention work.

Investing in those kinds of programs now can make a longterm difference in Chicago, helping erase the disparities that have existed for the city’s Black and Brown communities, Lightfoot said.

Those disparities have been highlighted by the pandemic, which has had a disproportionate impact on Black and Brown communities.

For example, Chicago’s communities have color have seen a disproportionate number of cases and deaths from coronavirus.

And small businesses on the South and West sides have faced more struggles during the pandemic due to longtime disinvestment in their communities. For example, Chicago’s small businesses typically have 28 days’ worth of cash kept on hand — but on the South and West sides, many only have about 17 days’ worth of cash, Lightfoot said.

“We need to realize that this support is about more than just COVID-19 itself. It stands as our latest re-commitment to our communities who are hungry and crying for resources,” Lightfoot said. “We have lived too long being segregated by race and accepting that as the status quo. Being isolated from opportunity and leaving too many people feeling like they’re trapped.

“One hope … is that we must prioritize as a city, not just a city government but as a city, as individuals, as families, as neighborhoods, as community organizations, as a faith community, we must prioritize closing these divides once and for all. And embracing that we have to be in this together. That is not a quaint slogan. But we must figure out ways that we manifest that as a reality in our city everywhere.”

The city has started to reopen and people are returning to work. Chicago entered Phase 3 on Wednesday, meaning the stay at home order was lifted and more businesses were allowed to reopen.

But the pandemic still poses a very real threat, Lightfoot warned.

So far, there have been 48,351 confirmed cases of COVID-19 in Chicago and the virus has killed 2,285 people.

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