What's Next for CPS Finances

This week is crunch time for the Chicago Public Schools to decide how to make ends meet for the 2025-26 school year. School board members are being briefed on the district’s budget, which must fill a deficit that now stands at $519 million. The budget proposal is expected to be public on Monday, August 11, when the agenda is posted for next Wednesday’s board agenda review committee.

The Wednesday agenda review committee meeting is likely where we’ll hear the most debate among board members about the budget proposal. Usually, agenda review committee meetings draw less attention and fewer public speakers than the regular board meetings, but next week’s may well be an exception.

There will be public hearings on the budget during the week of August 18, the same week that school starts. Those hearings will be legal formalities where members of the public can offer two minutes of comment. The final budget goes to a vote at the school board meeting on August 28. Only a simple majority is required to pass. State law requires that CPS pass a balanced budget for fiscal year 2026 by the end of August.

Making Ends Meet

The budget deficit has already shrunk from its earlier depth of $734 million, largely due to $165 million in cuts to custodians, transportation, meal services, and crossing guards. It’s worth noting that the highly publicized layoffs of SECAs and special education teachers in early July were caused by the school district’s annual reshuffling of staff from school to school based on shifts in students, and had little impact on the budget deficit.

A surprise uptick in funds from the state’s formula to send more money to higher-need schools, announced Friday, is also helping fill the hole. While it’s good news that CPS is getting an additional $50 million in state money, it’s bad news that the school district received less revenue than anticipated from the personal property replacement tax (PPRT), a business income tax on corporations and public utilities.

It will take creativity to find the remaining $519 million without harming students. “I don’t want to see any cuts to the classroom,” Mayor Brandon Johnson told reporters at his weekly presser yesterday. That suggests more central office cuts are likely. I spoke with a source who estimated the district could find ways to cut as much as another $100 million from central office staff and operations. 

If more central office cuts are coming, where will they land? Sources suggest the networks are a likely target, especially the instructional support leaders who make up much of their staff. These are experienced teachers who coach school leadership teams on how to improve instruction. 

At a community feedback session on the budget, CPS budget director Mike Sitkowski estimated eliminating the networks could save about $30 million. But I have not heard anyone suggest the district would go that far. I’ve also heard that the Office of Family and Community Engagement (FACE) could see reductions.

Furlough days are another possibility. Converting seven teacher professional development days into unpaid furlough days could save nearly another $100 million. Unpaid furlough days would likely spark pushback from the Chicago Teachers Union and the Service Employees International Union. But the combination of $100 million more in central cuts and those furlough days would bring the deficit down to $319 million.

Finishing the job demands facing even tougher political challenges. CPS could refuse to pay $175 million toward the city pension fund that includes non-teachers in schools, but that would make it harder to work with the mayor and City Council to get surplus TIF funds. An analysis published late yesterday by Chalkbeat suggests the school district may be able to borrow up to $200 million, though its junk bond rating means that the money would have to be repaid at high interest rates. Deciding to borrow also risks further downgrading the school district's credit.

Politically, it seems likely that CPS will agree to make the pension payment, Mayor Johnson and City Council will find a way to surplus another large amount of TIF funds, and whatever remains of the budget deficit could be filled by borrowing. Check back next week to see if Board Rule got it right.

No matter how the budget proposal turns out, getting it over the finish line won’t be as hard as passing a mid-year budget amendment. Passing a budget requires just a simple majority of the board, which is currently 20 members. That majority could be reached with the ten appointed members plus elected member Jitu Brown, who fiercely opposes cuts to classrooms.

"Little Appetite" for State Fiscal Oversight

Even the most fiscally conservative speakers at Thursday's legislative hearing on the financial situation for CPS acknowledged the state must play a role in long-term solutions. State lawmakers will have to give CPS more money directly or give the school district more power to raise taxes. "Without the state, there is no structural solution to a structural problem," said Joe Ferguson, executive director of the Civic Federation, an independent watchdog over Illinois and Chicago government.

But it's highly unlikely the state will come to Chicago's rescue in time to solve the immediate problem. Despite pressure from the Chicago Teachers Union, there's no sign of a special legislative session in Springfield this summer. It's equally unlikely the state will rush to revive the School Finance Authority, a separate body created to oversee Chicago Public Schools' finances in 1980, when they were so bad the district couldn't make payroll without borrowing.

On Monday, Rep. Curtis Tarver (D-25) released a statement saying he supports additional funding for CPS, coupled with fiscal transparency, accountability, and equitable resource distribution among district schools. "I understand there is little appetite, including myself, for a full takeover of CPS," he wrote. Last spring, Tarver introduced a bill to reinstate the School Finance Authority, but it died in committee. If the school district's final budget for 2026 includes borrowing, some sources I've spoken with think that might increase the chances lawmakers would choose to get involved.

It's also possible the state could raise the corporate income tax or create a new tax on digital advertising. There has also been talk of applying the sales tax to consumer services as well as goods, an approach favored by the Civic Federation. But all of these ideas are more likely to be on Springfield's agenda in spring 2026, not the fall veto session.

See you next week!