Several major blue cities in the U.S. have been marred by a slate of massive budgetary problems in recent years.
City officials in Chicago and Los Angeles are currently grappling with how to address substantial budget shortfalls. Meanwhile, Philadelphia is struggling with various financial issues across several sectors, with both its school district and the Southeastern Pennsylvania Transportation Authority (SEPTA), the city’s public transit system, facing massive budget deficits.
Chicago is facing a projected budget gap of nearly $1.2 billion for fiscal year 2026. The city’s budget deficit has largely been exacerbated by soaring pension costs, declining state revenue and rising personnel costs.
“Chicago has infamously bad finances,” Dylan Sharkey, an assistant editor at the Chicago-based think tank Illinois Policy Institute (IPI), told the Daily Caller News Foundation. “As far as the budget, it lays out power for the mayor and city councils, so for example, in some [Illinois] cities voters have to approve property tax hikes, and Chicagoans don’t get to do that.”
Chicago’s personnel costs, including salaries, benefits, pensions and other expenses for city employees, will consume 63% of the city’s corporate fund in 2025, totaling $3.53 billion, according to a report from the IPI.
Democratic Chicago Mayor Brandon Johnson signed an executive order Monday to create a “working group” of civic organizations, financial experts, labor organizations, local business leaders and elected officials to help tackle the city’s budget gap.
“This executive order is about bringing Chicagoans together so that we can continue the critical work of investing in our people,” Johnson wrote in a press release. “I have confidence in the collective wisdom and expertise of this wide range of stakeholders that will generate sustainable solutions to the challenges in front of us.”
Illinois had $10,915 in pension liabilities per capita at the end of 2022, according to a December 2024 report from the Reason Foundation, a libertarian think tank.
“When a city is in financial jeopardy, the state usually plays a role in helping out in the long term,” Sharkey told the DCNF. “But, unfortunately for Chicago, Illinois is broke too. A lot of it has to do with our [Illinois’] pension spending.”
Chicago residents have also faced a variety of struggles under Johnson’s leadership, including rampant crime and a massive migrant housing crisis. Recent polling has shown that Johnson’s approval rating among Chicagoans is at an all-time low.
Democratic Los Angeles Mayor Karen Bass during a State of the City address on Monday proposed laying off more than 1,600 government workers to close her city’s growing budget gap. The city’s budget crisis has notably been worsened by costly litigation, wildfire relief expenses and large pay raises for city employees.
“Los Angeles has one unique problem relative to other blue cities which is it is suffering from the aftereffects of the wildfires in January,” Marc Joffe, a visiting fellow at the California Policy Center, told the DCNF.
Relatedly, Los Angeles is grappling with a widening budget deficit. Los Angeles’ City Administrative Officer Matt Szabo warned during a March 19 city council meeting that the city’s budget gap is projected to reach nearly $1 billion dollars for fiscal year 2025-2026.
“Blue cities do tend to spend a lot of money on a lot of different things, including DEI [diversity, equity and inclusion], so maybe there is something there for them [the City of Los Angeles] to cut [out of the budget],” Joffe told the DCNF.
While Democratic Philadelphia Mayor Cherelle Parker said in a March 13 press release that her city’s finances “remain stable,” she added that her city’s financial situation is facing “heightened risks.”
The School District of Philadelphia is facing a projected budget deficit of roughly $300 million for fiscal year 2026, WHYY reported. The school district is planning to use 40% of its reserve fund to cover the budget shortfall, according to the outlet.
The district’s budget gap has largely been exacerbated by decades of underfunding and rising costs, such as expenses related to charter school payments and employee salaries.
“The School District of Philadelphia has been a good steward of its finances and fiscal responsibility continues to be a primary goal for the District,” A School District of Philadelphia spokesperson told the DCNF. “Last May, Fitch Ratings upgraded the District’s long-term bond rating to Investment Grade for the first time in the District’s history and in October, Moody’s upgraded the District to its highest level in at least four decades. The District also continues to make progress. On Feb. 7, 2023, Commonwealth Court Judge Renée Cohn Jubelirer ruled that the current system of funding education is unconstitutional and urged the Governor and General Assembly to address the issue. According to the majority report issued by the bipartisan Basic Education Funding Commission of the General Assembly, the School District of Philadelphia is underfunded annually by over $1.4 billion per year. We will continue to advocate for the needs of all children in our public schools system.”
SEPTA has also been facing massive budget problems in recent years, with SEPTA officials warning in a September 2023 presentation that the public transit service could head into a “death spiral” if it does not receive more state funding.
Scott Sauer, SEPTA’s interim general manager, warned during an April 16 city council meeting that the mass transit system is facing a $213 million budget deficit beginning on July 1, NBC10 Philadelphia reported.
The transit agency released a budget proposal on April 10 that would require 45% in service cuts, sizable fare increases, workforce reductions and a 9 p.m. curfew for all rail services to address its massive budget deficit, claiming that it is facing the budget shortfall due to a combination of the end of federal COVID-19 relief funding and increases in the day-to-day costs of providing service to customers.
The School District of Philadelphia, SEPTA, Johnson’s office, Bass’ office and Parker’s office did not respond to the DCNF’s request for comment.
Editor’s Note: This story has been updated to reflect The School District of Philadelphia’s comment.
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