The new Chicago Board of Education being seated Wednesday — the first to have elected members — will stare down a district on the financial brink: an imbalanced budget, rising costs, falling student headcount, a long list of infrastructure needs and steep debt and pension liabilities.
Budget watchdog group the Civic Federation warned current circumstances are “so serious that a State financial takeover… is not and should not be out of the question,” and urged the new board to right-size spending, make a long-term financial plan, and develop plans to advocate for revenue.
The new board’s immediate challenges are well-known: CPS has a $9.9 billion budget for this fiscal year that was balanced on its face, but didn’t include the costs of the first year of a new contract with the Chicago Teachers Union or the principals union. On the lower end, the contract with teachers alone could cost $125 million, but there has been no revenue source identified to pay for it. The current budget also relied on a series of one-time fixes like remaining federal COVID relief money and a tax increment financing surplus from the city.
Budget gaps for 2026 and 2027 are projected to cost more than $500 million.
Meanwhile, outstanding debts that must be paid down over time have grown from $6.7 billion in the 2014 fiscal year to $9.3 billion this year. That doesn’t count pension liabilities, which stand at $13.9 billion.
CPS has limitations on how much money it can raise on its own: the state caps how much the district can levy in property taxes, and its bond rating is considered “junk” by three out of the four rating agencies. That makes borrowing money more expensive. One of those agencies warned if the district spent money from its rainy day fund or took on new debt to pay for union contract costs, it risked further downgrade.
While state aid has increased since 2017, helping CPS fund its general operations and pay down pension debts, it is still “underfunded relative to need,” Civic Fed noted. Under the state’s Evidence-Based Funding Formula, CPS dropped from the highest-need tier to the second-highest, dropping its funding relative to other schools across the state.
Despite a slight uptick in enrollment brought on by the city’s migrant crisis, the district expects the number of students enrolled to continue falling or stay flat in the coming years. That leaves dozens of schools underutilized. 163 buildings — or 34% of all CPS schools — are less than half full. Though the number of students have dropped, the district “significantly increased” staffing under the previous CTU contract and flush with federal COVID relief money which will expire at the end of the 2025 fiscal year, leaving the district with a steep financial cliff.
Despite how politically fraught the 2013 school closures were and the board’s general opposition to it, the federation urged the board to launch an “extensive, collaborative community engagement process to identify and debate options, including consolidation of schools,” to better align with enrollment trends. Other spending cuts — which the union has opposed — need to be considered, according to the federation.
And revenue-generating measures such as additional financial assistance from the state will also be important moving forward, said Joe Ferguson, president of the Civic Federation. He urged the incoming board to involve the state in its early conversations about the budget.
“I would love for us all to see a board that comes forward and says, ‘This is a massive problem. We all need to be part of the solution coming together at the table,’ Ferguson said. “It’s very urgent … The state is going to have to be part of the solution.”
A financial crisis at the district in 1979 — in which some CPS staff went without pay and the district lost access to the bond market — led the general assembly to create the Chicago School Finance Authority a year later. The SFA issued bonds to cover district costs and raised a separate property tax to pay back those debts. It also approved budgets, financial plans and contracts submitted to the board. Its powers diminished when the mayor took over many school powers in 1995, and dissolved in 2010. Republicans in the state legislature floated the idea again during the district’s 2016 crisis, an idea that was dismissed by city, CPS, the Chicago Teachers Union, and democrats at the time. The “enabling legislation remains on the books, available for activation by the General Assembly,” the report said.
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