CHICAGO — City budget officials said Wednesday that nearly $1 billion of Chicago’s federal coronavirus stimulus money should be used to pay off borrowing done to plug budget holes over the past two years, disappointing some aldermen with other dreams for the cash.
The city is getting $1.9 billion from the feds as part of the stimulus package, but aldermen were told during a hearing Wednesday that more than half will go towards debt.
Susie Park, the city’s Budget Director, and Jennie Huang Bennett, the city’s chief financial officer, said the top priority is to pay off nearly $1 billion worth of long term debt the city borrowed to close budget gaps in 2020 and 2021 — a return to “scoop and toss” borrowing tactics the officials said was necessary because of the toll the coronavirus pandemic took on the city’s revenues.
“$500 million of our budget balancing was using scoop and toss and what we are hoping to do is use this federal money to replace that,” Park said of the 2021 budget.
While acknowledging the need to plug budget deficits, aldermen urged the city to use the federal dollars to ramp up city services that directly serve residents.
“It’s going to be a tough sell to say ‘Hey, we’re only going to take care of our needs as a government and not necessarily look at the needs of the people, residents and citizens of the City of Chicago. Let’s keep that at the forefront of the thinking,” said Ald. Jason Ervin (28th), chair of the Aldermanic Black Caucus.
Ald. Gilbert Villegas (36th), who is a co-sponsor of a proposal to launch a universal basic income pilot program with funding from the stimulus dollars, said he hopes any funding available after the city pays down debt goes directly to residents needs, rather than capital spending on infrastructure projects.
“There are a lot of needs that these funds could be utilized for,” he said. “I would hope that we utilize the [federal stimulus dollars] for what the intent was, which was to recover, to make sure that people are actually receiving the funds and are receiving the help needed during this pandemic.”
In total, city officials said the pandemic would cost the city $700 million in lost revenues in 2020 through 2021. Park and Bennett did not offer a projection of lost revenue in 2022, but Bennett said the city could be “close to recovery” by the end of next year, depending on the pace of the vaccine rollout and future waves of COVID-19 cases which could affect the outlook.
City tax revenues lagged projections by less than 1 percent during the first two months of 2021 as the economy recovers from the coronavirus pandemic, but officials aren’t concerned — yet.
As the economy recovers from the coronavirus pandemic, city officials expect revenues to meet or exceed projections, but additional waves of new COVID-19 cases could continue to slow growth.
While some taxes revenue streams are performing worse than expected, others are outpacing projections. Both outcomes reflect the nature of a pandemic economy that has upended normal life for city residents.
The city’s transportation taxes missed the projected mark by 30.8 percent — with the city taking in just under $14 million rather than the anticipated $20.2 million.
Revenue from business, utility and the Chicago sales tax missed the mark between 13.6 percent to 17.7 percent, taking in a collective $8.3 million compared to the expected $9.7 million.
Transaction taxes, however, came in at $56.4 million, 25.8 percent above the expected $44.8 million.
The city’s share of state income tax also exceeded projections by 4.5 percent to $29.5 million total.
“Overall, it is still important to recognize that the city is in the early stages of our recovery from COVID-19, and that the predictability of the recovery is still uncertain, Park told aldermen Wednesday.
“Subsequent waves may further impact the various revenue streams,” she said.
The revenue forecast was disclosed during a subject matter hearing in the Budget Committee. In a change from the past, the committee will review revenue projections and spending throughout the year ahead of weeks of budget hearings in the fall where city departments defend their annual budget requests.
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