Chicago Mayor Lori Lightfoot’s administration is projecting a rosy fiscal outlook and celebrating what she’s calling a “financial turnaround” in the city as she prepares to leave office next month.

In a midyear forecast, Lightfoot and budget officials announced Tuesday a forecasted $85 million budget gap in fiscal year 2024 – compared to the $474 million gap initially projected in last summer’s forecast. Lightfoot’s budget officials are also estimating relatively small budget gaps between $100 and $150 million through 2026.

Her office included a letter in the budget forecast where Lightfoot touted her administration’s efforts to reduce the $838 million budget deficit she inherited when she took office, and now declared “there is no federal fiscal cliff for the City’s finances.”

The narrow budget gap projections are a far cry from the whopping $1.2 billion budget gap Lightfoot faced in 2021 after the city’s finances were walloped by the COVID-19 pandemic.

The city’s fiscal health has been helped by an influx of nearly $2 billion in federal COVID-19 money (which will eventually run out), as well as faster-than-expected recovery from the pandemic. And the city’s budget gaps have steadily fallen since the 2021 high.

Lightfoot said the outlook is “proof of the work my administration has done to bring about the City’s financial turnaround.”

Lightfoot cites new sources of revenues, like the planned Bally’s casino and rating agency upgrades the city has received. Rating agencies have previously cited Lightfoot’s recently-implemented policy of making a pension payment that’s higher than required by state law. The city, this year, will pay around $240 million more than required.

But the city’s pension payment continues to be a significant burden on the city’s finances, and will continue to grow in the coming decade without significant new forms of revenue to keep up.

The forecast also assumes the city will raise property taxes at the rate of inflation – an automatic annual increase the City Council approved at Lightfoot’s request.

But that increase is at risk of going away.

On the campaign trail, Mayor-Elect Brandon Johnson vowed to not raise property taxes and said he would eliminate the automatic property tax increase tied to inflation. Instead, Johnson has pitched increasing taxes on certain businesses to generate millions in new revenue for the city and “auditing waste in government, prioritizing payments on our high-interest debts and spending smarter.”

The Lightfoot forecast acknowledged that each administration has its own fiscal policies to set, but warned that holding property taxes flat created “a growing and unmanageable structural imbalance.”

“If the City chooses not to take property taxes based on an inflationary impact, it must have an alternative structural revenue source or expenditure decrease in order to ensure that structural balance persists,” the forecast read.

Johnson’s team did not immediately respond to a request for comment.

Mariah Woelfel and Tessa Weinberg cover Chicago city government and politics at WBEZ.