City counting on state, federal funds to handle migrant crisis — or reserves could be at risk

Without a major infusion of state and federal funding for the migrant crisis, Chicago may have no choice but to raid its reserve funds, endangering the city’s bond rating, a top mayoral aide warned Tuesday.

Budget Director Annette Guzman brought up the reserve funds when asked where Mayor Brandon Johnson would turn first if the $150 million Johnson has earmarked to care for asylum-seekers in 2024 runs out.

“The city has put forth a budget that includes the money that we are willing to contribute to this. But the city does have reserves and things like that, which we do not want to use because it does support other things within the city’s operations,” Guzman told the Sun-Times.

Guzman acknowledged raiding the reserves would almost certainly cause Wall Street rating agencies to reduce the bond rating, which determines city borrowing costs.

“Exactly, which is why we’re not willing to do that. But it is an option on the table,” Guzman said.

“At the time that half the year comes around — if we are in the same [go-it-alone] situation we are now — we will be back at the table discussing this with all stakeholders, plus [City] Council as well as the mayor’s office.”

Chicago created short-, medium- and long-term reserve funds after former Mayor Richard M. Daley sold the Chicago Skyway and the city’s parking meters to private investors for a combined $2.98 billion.

Although the corporate fund was supposed to receive interest earnings only, Daley started raiding the parking meter fund in 2009 to subsidize his operating budget. Former Mayor Rahm Emanuel stopped that practice and amended the ordinance to prevent similar raids, then embarked on a multiyear plan to rebuild the parking meters reserves.

Against that backdrop, raiding the reserves would be financially perilous — but for Johnson, raising property taxes would be politically perilous.

He campaigned on a promise to hold the line on property taxes and honored that promise, forgoing $90 million in revenue by not taking advantage of an automatic escalator his predecessor, former Mayor Lori Lightfoot, put in place to lock in annual property tax increases to match the rate of inflation.

Guzman was asked whether Johnson has options other than raising property taxes or raiding reserves.

“I can’t think of anything [else] off the top of my head,” she said.

Questions about Johnson’s decision to earmark just $150 million for the migrant crisis in next year’s budget — as the city already spends more than $30 million a month — dominated Council budget hearings.

Alderpersons pressured the mayor’s budget team to identify “Plan B” after Gov. J.B. Pritzker and Illinois House Speaker Emanuel “Chris” Welch slammed the door on more migrant funding during the fall veto session.

Senior mayoral adviser Jason Lee defended the lowball figure, insisting Chicago taxpayers have “no appetite” to shoulder the other half of the cost alone.

“Tell me the alderman who is standing up saying, ‘I want the city [to] pay $400 million or $500 million, and I would approve that budget.’ You can’t have it both ways,” Lee said.

The budget director wholeheartedly agreed.

“The City Council has said both — [that] there’s not enough money in this budget, and there’s too much money in this budget for the migrant issue. And so there’s not even a consensus on the figure that the mayor has put forth,” she said.

Guzman said she does not believe Johnson’s urgent appeal for federal funds will fall on deaf ears, partly because of the political embarrassment President Joe Biden would suffer if he is renominated next summer in a city overwhelmed by the migrant crisis.

“It’s really important that we’re able to demonstrate how we can handle situations like this, because it goes to how we can lead — not only our city but our country,” she said.

Once the Council approves the mayor’s budget, attention will turn to the urgent search for additional revenue — a task Johnson has punted to a subcommittee led by freshman Ald. William Hall (6th).

Guzman expects the options presented by that subcommittee to include broadening the sales tax umbrella to cover a host of professional services favored by the wealthy and business interests.

The idea has been talked about for decades, only to hit a dead end in Springfield.

But, Guzman said, “We’re in a place now where people are more open to this idea. We’ve seen the dramatic shift in how people purchase things. It’s shifted more now toward services over goods. … Sometimes, it’s all about timing. … I look at it as a way of sharing the burden more equitably.”