Johnson Creates Budget Working Group as Chicago Braces for Possible Federal Funding Cuts

Mayor Brandon Johnson on Monday signed an executive order meant to build support among residents and community leaders for difficult budget choices ahead, describing Chicago's already fragile finances as being "at a crossroads" as President Donald Trump threatens to cut billions of dollars in federal funding to the city.

The order directs the city's Office of Budget and Management to hold public meetings and carry out a "comprehensive" review of all municipal spending. It also creates a new working group made up of business and labor leaders, community organizations, aldermen and members of the mayor's staff. The group is charged with developing far-reaching budget recommendations.

The move follows a contentious budget process last fall, when aldermen firmly rejected Johnson's call for a property tax increase. During that fight, the mayor ruled out layoffs and service cuts and ultimately avoided them. By drawing a broad range of city leaders into the process this early, Johnson may be hoping to avoid shouldering all the blame for unpopular decisions if the budget picture worsens for 2026 and beyond.

"We essentially need to do more with less," Johnson told reporters.

City officials have long expected a major challenge in balancing the next spending plan. Last summer, Budget Director Annette Guzman projected a 2026 budget gap of $1.12 billion. On Monday she said that figure had been "mitigated" by the new taxes and fees City Hall imposed in December. The problem could grow dramatically, though, if Trump follows through on a threat to cut $3 billion in federal funding to Chicago. "That's a different scenario that we weren't under before," Johnson said.

Asked whether layoffs are possible next year, Johnson said they "have been on the table for multiple budgets." In October he had called such a step a "dramatic and severe" last resort. On Monday he said that is not where the process begins, pointing instead to efforts to find greater productivity and operational strength, while adding, "We have to look at revenue as well."

Johnson fought hard last year to avoid broad cuts, and his opposition to layoffs led him to propose a $300 million property tax increase despite his own campaign pledge not to raise such taxes. The new working group could allow a similarly hard decision to come with the endorsement of key city leaders. Two weeks ago, the mayor also announced an early start to budget talks with aldermen, an apparent response to frustration in the City Council over the delayed and tangled process last year.

Ald. William Hall, whom Johnson tasked more than a year ago with leading a City Council Revenue Subcommittee, stood with the mayor on Monday. The subcommittee met several times, and Johnson repeatedly cited it as a source of forthcoming solutions. It did not, however, produce revenue ideas that made it into the budget, though Hall again promised it would find usable ones in its second year.

Guzman said the city faces "stark fiscal realities." She said Chicago would be "ill equipped" to replace billions in federal grants for areas such as public health, education and housing if they were cut. "Overwhelmingly, the city of Chicago is not equipped to replace billions of dollars worth of grant funding from the federal government," she said.

Ralph Martire, executive director of the nonpartisan Center for Tax and Budget Accountability, said the city's fiscal challenge "was not the creation of any one administration." Martire, who plans to join the working group, said structural problems tied to the city's revenue and services cannot be resolved "unless you have everyone at the table," and "unless you have everything on the table."