The Chicago Public Schools (CPS) Board of Education has approved a $10.2 billion operating budget for the 2025-26 fiscal year, closing a $734 million budget shortfall without resorting to high-interest borrowing or making a $175 million pension payment to the city, according to Chalkbeat. The plan, which passed in a 12-7 vote, underscores a significant shift toward fiscal restraint in the face of political pressure from Mayor Brandon Johnson and his allies, who strongly advocated for a borrowing plan that would have allowed CPS to make the pension contribution.
Why this budget matters
The CPS budget has long been a flashpoint in Chicago politics due to structural underfunding, debt obligations, and rising pension liabilities, Chalkbeat reported. By rejecting borrowing and deferring the pension payment, the board prioritised preserving classroom funding and avoiding an increase in the district’s substantial debt burden, which already affects resources available for students.The $175 million pension payment would have funded retirement benefits for CPS non-teaching staff as well as certain city employees. However, the board argued that making this payment now would force deeper cuts to schools and student programs, as noted by Chalkbeat.
How the deficit was closed
To eliminate the $734 million gap, the district’s strategy combines revenue assumptions and expenditure reductions:
- TIF Surplus Funds: The plan assumes $379 million from the city’s Tax Increment Financing (TIF) surplus, a city-controlled fund that reallocates property tax growth to development projects. This transfer remains politically sensitive because some officials argued that skipping the pension contribution could result in the city withholding these funds. According to Chalkbeat, board members countered that CPS is legally guaranteed a share of the surplus under state law.
- Expenditure Reductions: CPS introduced $272 million in cuts, primarily targeting central office operations and some support staff roles, rather than classroom positions. This move was confirmed by Chalkbeat and is designed to minimise direct disruptions to students. Interestingly, the union representing support staff backed the decision, recognising the long-term risk of heavy borrowing and pension-related liabilities.
Stakeholder reactions and political fault lines
The Chicago Teachers Union (CTU) strongly criticised the budget, warning that the decision not to borrow could lead to disruptive midyear cuts, including possible staff layoffs and program cancellations, should projected revenues fail to materialise, as reported by Chalkbeat.Some aldermen supported the board’s approach, calling on the city council to dedicate $500 million in TIF funding to CPS, while others argued that failing to address pension obligations and structural deficits now could create larger financial challenges in the future.
Persistent funding gaps
Despite recent increases in state aid, CPS remains $1.6 billion below the adequate funding level set by Illinois, Chalkbeat noted. With no additional state assistance expected this year, the district’s financial plan relies heavily on local sources, including TIF allocations and city support.This chronic shortfall highlights the systemic funding inequities facing CPS, which operates one of the nation’s largest school systems and serves a high percentage of low-income students, English language learners, and special education students, as emphasised by Chalkbeat.
A delayed but timely approval
The budget approval came after delays driven by leadership changes within the district and disagreements over pension obligations and borrowing, according to Chalkbeat. Despite these challenges, the board passed the budget before the legal deadline. Officials confirmed that borrowing remains an option later in the fiscal year if an emergency arises, but including a loan in the current plan would have triggered deeper cuts to school-level spending.
What’s next for CPS?
According to Chalkbeat, the approved budget reflects a deliberate choice to prioritise fiscal stability and classroom resources over short-term debt relief. However, it leaves several critical questions unresolved:
- Will the city honour the $379 million TIF allocation?
- Can CPS avoid midyear cuts if revenue projections fall short?
- How will the district address its $1.6 billion adequacy gap without additional state support?
District leaders have pledged to continue lobbying both the city and the state for increased education funding, while maintaining flexibility for emergency borrowing if necessary. The long-term outlook remains uncertain, as structural deficits and pension obligations continue to weigh heavily on the district’s financial future.
