January 13, 2025
The Chicago Public School District (CPS) faces a critical financial juncture, as outlined in a Civic Federation report released today. The newly expanded 21-member, hybrid-elected Board of Education (the “Board”) faces a confluence of financial challenges immediately upon taking office on January 15, 2025, as evidenced by discouraging trends that jeopardize the District’s ability to provide quality education necessary to prepare Chicago students for success. By laying out a comprehensive picture of the District’s financial landscape and offering solutions to improve CPS’s financial standing, the Civic Federation hopes to support the new Board in the monumental task ahead. This report also provides information and understanding to stakeholders, including elected and appointed government officials, education policy advocates, parents, and the general public. The full report is available here: civicfed.org/FinancialLandscapeCPSFY2025.
Upon taking office in January, the new Board will immediately be faced with the challenge of finalizing the collective bargaining negotiations ongoing with the Chicago Teachers Union and incorporating any additional costs from the result of that contract into an already structurally imbalanced budget and future budgets for which the District projects budget gaps of more than half a billion dollars. The Board will also need to resolve contested financial entanglements between CPS and the City of Chicago. These financial strains, coupled with long-term issues such as declining enrollment, rising expenditures, pension liabilities, and looming credit downgrades, demand immediate and strategic action.
The Federation’s report serves to explain CPS’s financial situation and trends including revenue limitations due to property tax constraints and insufficient State contributions; enrollment that has declined by approximately 21% since FY2010; underutilization of 56% of District school buildings; aging facilities with more than $3 billion needed in immediate infrastructure investment and $14 billion in total needed infrastructure investment; rising spending on personnel; $9.3 billion in outstanding debt; below investment-grade bond ratings; and a severely underfunded Chicago Teachers’ Pension Fund.
“CPS’ fiscal situation is fragile at best. To save itself from catastrophe, the incoming Board of Education will need to work quickly to identify and institute spending cuts and find new sources of revenue,” said Joe Ferguson, president of the Civic Federation. “In doing so, any resort to irresponsible fiscal practices, such as depleting reserves or issuing debt to fund operations, will likely trigger further downgrades of its already below-grade credit rating that would increase borrowing costs and threaten constriction of access to markets. Instead, the District should implement long-term financial planning to break from the long-running crisis management orientation toward sustainability.”
CPS received nearly $2.8 billion in federal ESSER COVID-19 pandemic relief funds. Rather than use those funds to sustain operations with indicated support for pandemic-specific challenges, CPS drastically increased its operational expenses through significant increases in personnel and expanded programming without having identified revenue streams needed to support the expansion once federal pandemic-era funding ends this year. CPS itself projects annual deficits of over $500 million in the coming years, even before accounting for significant cost increases from ongoing collective bargaining agreements. The Civic Federation now calls on the Board to work towards right-sizing spending to align with achievable and sustainable revenues in a system with a declining student population.
In this overview report, the Civic Federation offers several recommendations for the Board of Education to improve its financial situation, including:
- Conduct long-term financial planning with involvement from all levels of the CPS community;
- Begin a process of right-sizing the district’s spending;
- Consider revenue options and develop an advocacy plan around revenue, particularly at the State level;
- Resolve financial entanglements with the City of Chicago;
- Accompany the five-year strategic plan with financial requirements and align it with realistic fiscal capacity;
- Continue building general operating reserves;
- Request public disclosure of additional budget information; and
- Define and bolster the Board of Education’s authority, structure, and resources to meet its obligations under state law as a fiduciary of the district.
“CPS must address these urgent fiscal issues and right-size its operations and budget to match realistic revenue capacity in a system currently marked by depressed enrollment and closely correlated underutilization of facilities in order to optimize the use of existing assets in a stable and sustainable fashion. If the District’s financial situation doesn’t improve soon, a worst-case scenario, which state lawmakers should begin to examine, could include a state financial takeover akin to the Chicago School Finance Authority created in response to the 1979 CPS financial crisis. That’s the last outcome we should want, but one that may be necessary depending on the magnitude of cost increases in the continuing collective bargaining negotiations,” said Civic Federation President Joe Ferguson.