Chicago Chief Financial Officer Ashlee Gabrysch stepped down on Friday.
“It has become apparent … that to continue in this role would be to compromise my integrity and professional obligations,” she wrote in a resignation letter first reported by the Chicago Tribune.
Gabrysch is the third CFO to leave this year under Mayor Brandon Johnson.1
And her departure comes with just 48 days left for the city to pass a budget.
It raises immediate concerns about the city’s access to the bond market. It highlights the city’s backwards financial governance. And it provides a glimpse into what a Chicago default could look like.
Why Gabrysch stepped down
Gabrysch joined city government in August after working as a senior director at Fitch Ratings. She served as Fitch’s lead analyst on Chicago and Illinois.
On the first day of budget hearings, she publicly contradicted Johnson’s claims about his proposed budget. And she was right.
On Oct. 26 in response to questioning from Ald. Matt O’Shea, Gabrysch corrected Johnson’s claim that his budget proposal closed the city’s deficit with 76% structural fixes, rather than with new borrowing or other one-time gimmicks. Gabrysch correctly asserted the real number was 56%.
She also warned in emails that the 76% figure was “not a truthful statement to investors.” For this sin, the Sun-Times’ Fran Spielman reported Gabrysch was hauled into a meeting with Johnson chief of staff Cristina Pacione-Zayas and acting Corporation Counsel Renee Hatcher. She was scolded for not “staying true to the administration’s message” and told there could be “no sunlight” between her and the administration. Allegedly, she was also told to leave the structural-solutions percentage out of an upcoming bond authorization. (What Chicago tells investors about its finances when it sells bonds is subject to federal securities law.)
After Gabrysch’s resignation, the mayor’s office began a smear campaign. Gabrysch called it an attempt to “deflect from the serious issues at stake,” which she described as “disappointing but not surprising.” “I stand by my statement and will continue to operate in accordance with my values and integrity,” she said.
Immediate concerns
Chicago is perched just one notch above junk status by Moody’s. And two notches above by S&P, and three by Fitch and Kroll. Privately, many industry observers believe the city’s fundamentals already warrant a junk rating.
Ald. Bill Conway has called for an “immediate and robust investigation,” saying Gabrysch’s letter is an “obvious indication that she was asked by the Mayor’s Office to present false information.” Finance Chair Pat Dowell wants an outside audit of the city’s finances.
State law allows the City Council to lead investigations of this kind independently from the city’s corporation counsel, including subpoenaing witnesses and documents. Aldermen should use it, especially given Chicago’s acting corporation counsel was directly involved in the dispute with Gabrysch.
An accurate understanding of what happened here is critical to maintaining trust with creditors.
For context:
Chicago’s last two debt issuances were undersubscribed. In November 2025, Goldman Sachs was left holding about $75 million of unsold sales-tax-backed bonds. In March, the city pulled $292 million of tax-exempt bonds from an $800 million deal.
Chicago is not planning any major borrowing between now and the end of the year. But trust lost now will still be lost when the city returns to the market early next year.
Johnson’s budget proposal relies on $480 million in taxable bonds, paid off over five to seven years, to cover police misconduct settlements. That borrowing would need to happen early next year. The city estimates the first tranche of those bonds would carry a 6.923% interest rate. After Gabrysch’s exit, the real rate will very likely be higher.
The other immediate concern is Chicago’s lines of credit, which it draws on for hundreds of millions of dollars to cover costs until it can pay them off with bond sales.
Under these agreements, banks can demand immediate repayment of the entire line of credit under certain conditions. One is a downgrade to junk. This happened in 2015, when Moody’s cut Chicago to junk. That gave banks backing Chicago’s variable-rate debt, credit lines and interest-rate swaps the right to demand $2.2 billion in accelerated principal, interest and swap termination payments.2
The city’s line-of-credit agreements today no longer count Moody’s. But if two of the three agencies the banks do count (S&P, Fitch and Kroll) drop Chicago below investment grade, Chicago could be forced to make a very large, immediate payment to banks. And it would likely need to bond to do so.
How the market would react to such a distressed attempt at borrowing is an increasingly frightening question.
What defaults look like
“What if Chicago goes bankrupt?”
That was the title of a small conference convened by Yale Prof. David Schleicher and UPenn Prof. David Skeel at Northwestern Pritzker School of Law’s Center on Law, Business, and Economics on Oct. 26.
Chicago is not yet on default’s doorstep. And state law provides no framework for Illinois municipalities to enter bankruptcy.
But Gabrysch’s departure is a reminder that defaults happen when city governments lose trust. And that can happen in an instant.
In 1975, New York City needed access to credit. But no one bought its bonds. And even when a new state entity (the Municipal Assistance Corporation, or MAC) was created to issue debt for the city, backed by city sales taxes the state diverted to it and a state “moral obligation” pledge, leaders had a tough time selling investors on the city.
“No one believed in the credibility of New York City government,” said Donna Shalala, a former board member of the MAC.
The recent CFO drama in Chicago “suggests severe organizational stress,” said Matt Fabian, a partner in Municipal Market Analytics. “It’s not so much about interest rates. It’s about thinning the universe of investors.”
Gabrysch’s resignation, citing integrity, shows the kind of event that could scare off investors. If that happened at a moment when Chicago needed cash quickly, default would become a real possibility.
Fixing Chicago’s structural problems
Chicago has the lowest credit rating of any big U.S. city. Seven of the nation’s 10 worst-funded pension plans are in Chicago, and the unfunded debt of the city’s four pension funds plus the teachers’ fund exceeds that of 44 states. About 40% of the city’s budget goes to pensions and debt.
That’s due to decades of poor decisions. Those poor decisions arise out of a bad governance structure. Fixes to this should include:3
An independent financial watchdog: Chicago is the largest American city with neither an elected financial watchdog nor a city manager, and its CFO serves at the mayor’s pleasure. The city could expand the elected treasurer’s job to look more like the comptrollers in New York and Los Angeles.
More budget brains in the City Council: Expand the Council Office of Financial Analysis to look more like New York City’s Independent Budget Office, and guarantee aldermen access to all of the executive branch’s financial information. Gabrysch’s exit shows why aldermen cannot rely on the mayor’s numbers.
Voter approval for new debt: Twelve of the 15 largest U.S. cities require voters to approve new general obligation debt. Chicago doesn’t. Aldermen couldn’t even raise the bar inside City Hall: in October, they fell one vote short of overriding Johnson’s veto of an ordinance requiring 30 votes, not 26, to take on new debt.
A real framework for distressed cities: Illinois’ only tool for broke cities is a state oversight board that can approve budgets, loans and contracts but can’t restructure debt. East St. Louis spent 23 years under one with little improvement to show for it. And Harvey is currently drowning in pension debt it cannot pay while cutting services to the bone. Illinois should establish a distressed cities framework that provides monitoring, early intervention, and emergency access to Chapter 9 bankruptcy. Not so Chicago files right away, but so every party has a reason to come to the table.
Chicago’s next CFO should not have to choose between the mayor’s message and the truth.
Until the city fixes how it governs its finances, every CFO will face that choice, and investors will be watching.
In the news
Charter chatter: Mayoral candidate Mike Quigley wants a city charter. “The next mayor has to be willing to be, on paper, weaker,” Quigley said at a candidate forum on Nov. 12. “We need a city charter that codifies that.” He also called for a City Council version of the Congressional Budget Office.
Food fight: Chicagoans cannot legally operate a Chicago-style hot dog cart, which I highlighted in a piece for the Washington Post earlier this year. The mayor is now backing a new ordinance that would let licensed street vendors sell food they prepare on pushcarts, such as cut fruit, assembled dishes and drinks. The Institute for Justice Clinic on Entrepreneurship says it “would open up opportunities.” The catch: carts would have to stay 200 feet from restaurants, vendors would face a four-hour time limit, and the City Council could ban the carts in specific areas.
Gabrysch’s predecessor, acting CFO Steve Mahr, resigned in late July without giving a public reason. Deputy CFO Noor Shaikh resigned with him. That followed the departure of former CFO Jill Jaworski, who announced in January she was leaving for a job at Navy Pier. Budget director Annette Guzman also resigned in early August, days after Mahr. The city’s current acting budget director, Jonathan Ernst, is on medical leave until Nov. 20.
The banks agreed to hold off while the city refinanced.
A Chicago city charter is where basic financial safeguards belong, so a future mayor and future council majority can’t simply repeal them for the sake of convenience.
The answer is relatively simple and, of course, impossible. The city should direct its resources toward municipal services like water supply, police, firefighters, streets, and sanitation and let the county, state and federal governments handle social welfare services.
What this excellent postmortem dramatizes is that character counts not just in The city’s Finance Department But public service in general. Management in fiscal crises and experience in managing a huge government bureaucracy also count.