Statement and Analysis of Baker Tilly Report on CPS Funding Options

Background

CPS is facing immediate pressure to meet three significant financial commitments before the end of the current fiscal year, ending June 30, 2025:

1. Collective Bargaining Agreement (CBA) with the Chicago Teachers Union (CTU)

2. CBA with the Chicago Principals & Administrators Association (CPAA)

3. Intergovernmental Agreement (IGA) for a Municipal Employees’ Annuity and Benefit Fund (MEABF) Pension Payment
   
   

A new report from Baker Tilly Advisory Group, commissioned by the Chicago Board of Education, finds that options available to cover these obligations pose significant risks to the district’s financial stability and to classroom operations—especially given that fewer than four months remain in the fiscal year.

Key Takeaways from the Baker Tilly Report

Mid-Year Budget Cuts

• CPS’s $8.4 billion operating budget is 70% salaries and benefits. Achieving $175 million in cuts three quarters into the fiscal year would require significant staff reductions or as many as 10-11 furlough days across the district, per Baker Tilly’s estimates.

• Fewer staff and instructional days immediately hurt students.

• CPS is already scrambling to fill a $200 million gap from lower-than-expected personal property replacement tax revenues and cost overruns in special education and transportation.

Additional TIF Surplus

• The City declares TIF surpluses, distributing a portion to CPS. While $298 million is expected in FY2025, further surplus is far from guaranteed.

• Given the late timing in the fiscal year, requesting additional TIF surplus from the City is politically challenging.

Borrowing & Debt Restructuring

• CPS carries $9.3 billion in existing obligations and faces higher interest rates due to a junk bond rating. Any new borrowing may help solve a short-term cash crunch but saddles the district with more interest expense.

• Baker Tilly’s report notes that any debt restructuring would require extensive legal and financial reviews. Baker Tilly notes they are not CPS’s municipal advisor, so a separate financial team would have to manage bond issuance or restructuring. Since the Board only has 48 hours until they vote and about three months left in the fiscal year, there’s limited runway to execute a complex refinancing.

• Shifting debt to future fiscal years “kicks the can,” potentially forcing bigger cuts down the road and risking more credit downgrades.

• The report leaves no doubt: Borrowing to fund the City’s $175 million pension payment poses significant financial risks and may lock CPS into an even worse fiscal position down the line.

Conclusion

The Baker Tilly report confirms that CPS doesn’t have a viable way to absorb the City’s $175 million pension bill without harming student learning—either this year through immediate cuts or in the future via increased debt service. Time is tight, and each proposed solution leaves the district extremely vulnerable.

With the Board poised to decide this week, Kids First Chicago, families, and community members urge a more sustainable approach—one that keeps resources in classrooms, addresses the long-standing structural deficit, and doesn’t burden students with a cost the City is legally required to shoulder.

We urge members to vote ‘no’ on effectively shifting these costs onto children, and instead work toward sustainable solutions that keep resources where they belong: in our schools.