Chicago Public Schools is teetering on the brink of the financial abyss, one that threatens to unravel the recent progress families and educators have fought so hard to achieve. The system is grappling with a structural budget deficit projected to be more than $700 million this year, the largest it has faced in nearly a decade.
The emerging crisis stems from chronic underfunding and a reliance on one-time COVID-19 relief funds to create more than 9,000 new positions since 2019 — even as student enrollment declined by nearly 40,000. The district can be criticized for expanding staff without a sustainable plan, but it’s unsurprising, given the pandemic’s devastating impact on students’ learning and well-being, with 2 out of 5 CPS students now chronically absent.
Chicago students have been shortchanged for decades and remain so. According to the Illinois State Board of Education (ISBE), CPS is underfunded by more than $1 billion because of insufficient local and state support and the disproportionately large number of high-needs students it serves.
To close this year’s deficit, CPS is using its remaining COVID-19 relief funds to cover about one-third of the budget shortfall, alongside implementing administrative cuts, personnel reductions and debt restructuring and leaving vacancies unfilled. However, the majority of these are one-time fixes, resulting in more than 70% of the deficit rolling over into the next fiscal year.
Alarmingly, CPS projects its deficit will grow by another 17% this year due to new labor agreements, pushing the total to nearly $900 million.
Marking one of the first times a mayor has opposed a budget from a Board of Education and schools CEO, Mayor Brandon Johnson rejected CPS’ proposed budget, urging instead a short-term, high-interest $300 million loan to avoid staff cuts and fund planned Chicago Teachers Union contract increases. The school board refused, with Civic Federation President Joe Ferguson likening it to a payday loan due to its exorbitantly high interest rates.
Johnson hoped to use the loan to bridge this year’s deficit while persuading Springfield to increase funding in future years. But state leaders, including Gov. J.B. Pritzker, repeatedly have indicated no such additional state aid will be forthcoming.
In our new report, “Revenue Options to Address Chicago Public Schools’ Deficit,” Kids First Chicago presents six revenue proposals. Our goal is to ignite public discourse around how to secure the future of public education in Chicago.
Property taxes, CPS’ primary revenue source, constitute roughly half of its operating budget. Since 2012, the district has raised property taxes annually to the statutory limit to match cost of living increases, or 5%, whichever is less. Despite Johnson’s campaign pledge not to raise property taxes, his board continued the practice this year, recognizing the necessity of raising new revenue.
The Kids First report explores a referendum to temporarily lift the legal limit on property tax increases. Compared with other large Illinois districts, Chicago’s property taxes remain relatively low, even with such an adjustment. This option, however, requires significant political will and civic support. Less than half of such referendums pass in Illinois. Pairing this with a property tax relief program would help low-income and fixed-income homeowners weather the increase.
Another proposal is to let all Chicago tax increment financing districts expire, reintegrating their assessed value into the general tax base and boosting CPS revenue. Of note, this option requires a closer impact analysis as it would eliminate TIF surplus as a CPS revenue source and remove TIF as a tool to fund district capital projects.
The state also undeniably has a role to play in shoring up district finances. Merging the city’s teacher pension fund with the state’s teacher pension system would bring greater fairness to Chicago taxpayers, who currently pay into both teacher pension systems, while those outside the city pay only into the state fund. This consolidation could be phased in, gradually allowing the state to assume pension costs of Chicago teachers and thereby enabling CPS to focus its property taxes, like every other Illinois school district, on serving its students.
We also explore changes to the state’s evidence-based funding formula. Increasing appropriations to better fund the formula is politically appealing to legislators as it benefits school districts statewide. However, Springfield would need to identify new revenue sources, and we find the impact of increased appropriations on CPS’ deficit to be modest.
Finally, incorporating a concentrated poverty adjustment into the formula would direct a greater share of state funding to districts such as CPS, which serve students with severe socioeconomic challenges. While the formula already includes income level as a variable and the federal government provides Title I funding to school districts to support low-income students, some argue that adding a concentrated poverty measure could better address the compounded challenges faced by students in areas with high poverty rates.
Each option we offer has barriers and downsides, but solving the CPS financial crisis will require a combination of fresh ideas and difficult choices. The alternative — allowing CPS to continue on its current path — is not an option. The long-term repercussions of inaction, including devastating cuts to the classroom and drastic reductions in support services for students and families, far outweigh any short-term political fallout.
Now is the time to put our kids first and secure a sustainable future for Chicago Public Schools.
Hal Woods is chief of policy, Chris Poulos is senior manager of research and policy and Micaelan Gasperich is a data scientist at Kids First Chicago, an education nonprofit.
This opinion piece appeared in the Chicago Tribune on July 30, 2024.