Budget Hearings Recap

Yesterday, the Chicago Board of Education held two public hearings on the FY 2026 budget proposal presented last week. The proposed budget protects classrooms from further cuts, avoids borrowing, and conditions making the controversial city pension payment on receiving additional revenue.

At the end of the second hearing, board members Jessica Biggs and Angel Gutierrez publicly committed to vote for the proposed budget at next week's board meeting. But President Sean Harden and members Michilla Blaise, Jitu Brown, Debby Pope, and Karen Zaccor questioned the assumption that the Chicago Public Schools can bank on receiving another record-setting TIF surplus to help fill the deficit. They argued in favor of adjusting the budget to allow for borrowing if necessary, whether due to a smaller-than-expected TIF surplus or a loss or freeze of federal funds, as briefly happened in July.

Last week, 11 board members signed a letter asking CPS Interim CEO Macquline King to commit to making the payment and to tweak the budget to allow for borrowing as a last resort.

Tackling TIFs

The board is divided over whether the school district can rely on another $379 million TIF surplus to balance its budget. But some observers argue this is a distraction that board members allied with Mayor Brandon Johnson are using to follow the mayor's wishes and borrow to pay $175 million toward a city pension that includes nonteaching CPS employees.

In a budget update presented after public comment, CPS budget director Mike Sitkowski explained that state law and city policy require that unallocated funds from certain TIF districts be calculated annually and distributed to the governmental agencies that receive property taxes, including CPS. That's a TIF surplus.

Chicago mayors have declared a TIF surplus every year since 2010, following a 2009 Chicago Reader investigation into their use as the mayor's "shadow budget." The investigation also prompted the City Council to put TIF funds and development projects online. Mayor Lori Lightfoot made efforts to ensure TIF funds were used as intended, to fund development in areas that wouldn't attract projects without subsidies.

Mayor Johnson has already promised to let dozens of TIF districts expire to help fund his ambitious plans for more affordable housing. When those districts expire, the growth in real estate value in those districts can be taxed not only by the city, but by all the other government agencies that receive property taxes, including the schools. This increases revenue for schools year-over-year without relying on mayoral whim.

At the same time, the amount of money in TIF reserves has grown substantially, and the city has budget problems to solve, too. "Everyone knows the city is going to declare a large TIF surplus to balance its own budget," said Hal Woods, policy director for Kids First Chicago, in a public comment to the board.

But board members who recall the long history of TIFs as a slush fund and a political tool remain skeptical that they are a reliable funding source. "What happens if City Council members spend most of the TIFs, reducing the surplus?" asked Brown. "I think any assumption that will not happen is politically naïve."

"It is my understanding that the city has moved away from using TIF surplus as a means of balancing its budget," said Harden.

Four City Council members made public comments supporting the proposed budget: Nicole Lee (11), Nicholas Sposato (38), Andre Vasquez (40), and Scott Waugespack (32). Alders Vasquez and Waugespack insisted that board members have no reason to fear losing out on TIF surplus nor that CPS employee pensions would be at risk if they make reimbursing the city for a portion of the pension payment conditional on receiving new revenue.

"City Hall is state-mandated to cover the pension payments. That is law," said Vasquez. Regarding the question of TIF surplus, he added, "In order to solve our own budget, we need to take out a TIF surplus. Anyone who tells you we're going to withhold TIF is lying to you. ... It's basic extortion."

"We are going to make sure that CPS gets the almost $380 million in tax increment financing surplus," said Waugespack. "It's just the law that when we surplus, every other entity gets what their percentage is."

Is there a Springfield Strategy? Maybe.

Board member Emma Lozano neatly summed up the position of the mayor's allies: "We are fighting for state funding, and we're not going to stop fighting for it. I have confidence we're going to get it, and once we get it, we can pay back the loan."

Unfortunately, that is the same thought process that inflamed the disastrous budget situation in 2016 and 2017, which led to the borrowing that brought the school district's bond rating down to junk status. At that time, CPS leadership borrowed on the assumption that new state money would be coming in, given that a bill to revise the state's education funding formula had passed the General Assembly. But then-governor Bruce Rauner vetoed the bill, which forced CPS into making midyear cuts, including furlough days.

Board member Brown said that on Thursday, Chicago board members will be meeting with their counterparts in districts across the state to organize for more money for schools. Brown said he had commitments from board members in Proviso, Highland Park, Berwyn 100, Berwyn 98, Oak Park, Skokie District 59, and East St. Louis.

Quotes of the Day

The funny one: Ald. Nicholas Sposato (38): "Dr. King, I just want to say to you personally, I had you all wrong. I was 100% wrong about you, and you've been a pleasant surprise to me. God bless you. God bless everybody on the board, and hopefully we find a bunch of money and resolve all this stuff."

The serious one: "When you cut the budget, bad things happen to those individuals like my son and grandson, who need those self-contained classrooms," said parent and veteran teacher Vicki Harris, through tears.

The Count and the Pressure

Yesterday, Fox32's Paris Schutz reported that 9 board members support the budget as is; 10 want it changed to include the pension payment and the option to borrow. I'm told there's a lot of behind-the-scenes efforts happening to move opponents.

Interim CEO King has reportedly also faced heavy pressure from board members and City Hall to tweak the budget proposal. Though Ald. Matt O'Shea (19) did not speak during yesterday's hearings, he did post a message of support for her on X: