July 24, 2024
In an analysis released today, the Civic Federation expressed significant concern about the escalating fiscal challenges facing Chicago Public Schools as it votes to approve its FY2025 proposed budget and works to finalize its teacher contract. CPS is spending the last of its federal COVID relief funding at a time when costs associated with personnel and collective bargaining agreements are increasing. Intensifying the budgetary pressures are both the growing cost of operations and the shortfall in pension funding the District receives from the State, both of which factor into CPS’ ongoing struggle to fully cover its costs and achieve financial stability.
The Federation recognizes that CPS has devised a technically balanced budget for FY2025, favoring spending cuts and other savings rather than borrowing to cover operational costs as the Mayor’s Office had urged the District to do. However, some of the measures are one-time in nature, signaling the greater reality of a budget that remains in structural deficit. Moreover, it fails to factor in and address substantially increased operating costs that will have to be addressed in budget amendments this fall once collective bargaining agreements with the teachers’ and principals’ unions are finalized. Estimates show that CPS’ FY2025 $505 million deficit could balloon to closer to $900 million in FY2026. Additionally, the District will not have COVID relief funds to fall back on after the last tranche of $233 million is used in the FY2025 budget.
“We’re appreciative of the intention of CPS and the Board of Education to lean towards more fiscally responsible approaches that give greater emphasis to savings and efficiencies instead of deficit borrowing,” said Joe Ferguson, president of the Civic Federation. “However, at the end of the day, this is a moment-in-time budget that meets a technical legal requirement but utilizes fuzzy math to do so, cognizant of the fact that it does not account for the greater operating costs that will be embodied in the new collective bargaining agreement with CTU likely to be finalized in the weeks ahead.”
The Federation for years has warned that CPS lacks a long-term plan to ensure both sustainable resources and controlled costs. It is now calling on the District to work towards creating such a plan.
”Given the incredible fiscal pressure the District faces, it is imperative that CPS works to produce a public, multi-year plan that details revenue and expenditure scenarios along with cost-saving efforts it could pursue in light of projected future deficits,” Ferguson said. “Savings and efficiencies must be prioritized in the mix of solutions needed to address CPS’ budget challenges. However, the Federation recognizes that new revenue sources will inevitably be needed from an array of options, such as those advanced for consideration by Kids First Chicago, and will likely require increased assistance from the State of Illinois.”
The State’s imbalanced funding of the Chicago Teachers’ Pension Fund is among the Federation’s key financial concerns for CPS. CPS is the only school district in the State that is required to support the majority of its pension system. The State funds the CPTF at 35% of its full cost, and funds the Teachers’ Retirement System, the pension fund affiliated with all other public schools in Illinois, at 99% of its full cost. Out of necessity, CPS relies on operating funds to bridge its pension funding gap. The Civic Federation recommends consolidating the CTPF with TRS to establish a more equitable funding structure.
Further complicating CPS’ long-term budget planning are its legal and financial entanglements with the City of Chicago, which remain unresolved. CPS will begin operating completely separately from the City of Chicago starting in 2027, once its elected school board is fully in place. However, there has been no public-facing discussion around which types of financial support from the City of Chicago will continue at that time. Chief among these unresolved entanglements is whether and how much CPS will reimburse the City of Chicago for part of the pension contribution covering non-teacher employees who participate in the Chicago Municipal Employees’ pension fund.
“The absence of a formal process involving joint engagement by all relevant parties, including CPS, the City and the State, to resolve these critical legal and financial issues will increasingly hinder CPS’ ability to strike a plan to meet its mounting future fiscal challenges,” Ferguson said.
The Civic Federation offers the following recommendations to Chicago Public Schools and the Chicago Board of Education:
- Develop a long-term plan to prepare for impending fiscal year cliffs;
- Continue advocating for increased State funding;
- Provide additional time between the budget release, public hearings and Board approval;
- Create a working group to resolve ongoing legal and fiscal entanglements with the City of Chicago;
- Consolidate the CTPF and the Teacher’s Retirement System to equalize State pension funding for teachers;
- Conduct finance committee meetings; and
- Include additional explanation of expenditures and personnel, along with actual revenues, in the budget book. The amended FY2025 budget should include a detailed narrative describing changes to expenditure projections and how those additional costs will be paid for in this year’s budget.