Chicago Public Schools faces $500M deficit despite $10B budget

Chicago Public Schools’ reliance on temporary federal pandemic funds has left the district grappling with deficits even before factoring in a new Chicago Teachers Union contract. $505M deficit + $10B in demands = taxpayer trouble

Lots of warnings about treating temporary federal pandemic funds as permanent revenue were ignored in Chicago Public Schools, so now those funds are nearly gone and it faces a $505 million deficit nearly identical to the expiring federal cash.

Plus, that $505 million deficit is before factoring in whatever the Chicago Teachers Union gets out of over $10 billion in new contract demands.

CPS administrators have proposed a 2025 budget topping $9.9 billion – up $500 million from the 2024 budget. The budget includes $149 million in additional school-level funding, $38 million in new funding for programs and resources related to students’ physical, mental and emotional well-being, and $611 million in capital spending after the capital budget was scaled down to $155 million in 2024.

Despite the increase in spending, the district was still reeling from a $505 million deficit for the upcoming year. Growth in expenses is outpacing growth in revenues. A major reason for the deficit is nearly $2.8 billion in temporary federal pandemic-related aid has been built into the district’s spending base since 2020. Pandemic-related aid to the district is set to decline by $504 million this year – from $737 million in 2024 to $233 million in 2025 – as CPS expends the final Elementary and Secondary School Emergency Relief Fund money it has available. Coincidentally, CPS’s 2025 budget shortfall tallied $505 million – virtually the exact amount of the reduction in temporary federal aid.

While district leadership has proposed cuts and “efficiencies” to eliminate the deficit for the upcoming school year, the proposal does not account for increased costs under a new Chicago Teachers Union contract. CTU has made more than $10 billion in new contract demands from the district. The spending plan also obfuscates the underlying conditions that created the budget shortfall in the first place.

CPS initially estimated the 2025 budget deficit would tally $391 million as federal pandemic funding began running out. However, increased health care costs and special education costs grew the fiscal year 2025 deficit to $505 million. District administrators have proposed closing the $505 million budget shortfall through a variety of likely-temporary measures, including shifting grant funding to cover local costs, reducing building maintenance and repairs, eliminating 272 custodial and bus monitor positions,  enacting a central office hiring freeze and restructuring debt costs.

Notably absent from the budget proposed by district leaders are increased costs of a new Chicago Teachers Union contract. The minimum 9% “cost-of-living adjustments” demanded by the union would cost more than $230 million alone in 2025, before factoring in the proposed changes to annual “step increase” pay raises, increases to teacher stipends and additional staffing demands. In total, CTU has made demands that would cost the district more than $10.2 billion during the course of the contract from 2025-2028.

While negotiations between CTU and the district are ongoing and final costs have yet to be determined, district administrators and union leaders must face the fact that district resources have already been fully tapped. The remains of pandemic funds will be spent in the upcoming budget and the district has already pursued central office cuts to bring the current budget into balance.

Mayor Brandon Johnson and CTU leaders have been pushing CPS to pursue a $300 million borrowing plan to finance the anticipated increase in costs, but CPS administrators have been critical of the notion. CPS bond ratings are already considered “junk” – or non-investment grade by the major bond ratings agencies – meaning taxpayers would fund very high interest costs.  A one-time debt issuance to finance permanent spending increases would make matters worse in following years. That habit of treating temporary funds as permanent is exactly why the district is in trouble with big deficits ahead.

City and union leaders have also been making demands of Gov. J.B. Pritzker to increase state funding for CPS by $1.1 billion. That figure comes from the state’s “evidence-based funding” formula, which was passed in 2017. CPS funding is $1.1 billion short of the “adequacy” target created by the state’s funding formula, leading Johnson and CTU bosses to claim Pritzker is short-changing the district, despite annual increases pursuant to the 2017 law. While Johnson made these claims, Pritzker has said the mayor has never personally asked him for the funds and suggested CPS’ financial mismanagement of federal funds created its problems. Pritzker also said bailing out CPS – or any local school district – was “not necessarily the responsibility of Springfield.”

With the district’s current resources already maxed out and little support for other funding options, CPS is projecting large budget deficits for the foreseeable future. The projected deficit for the FY 2026 budget is $508.7 million and is expected to grow to $557.8 million in 2027.

These projections don’t include the costs of a new CTU contract with the district. CTU’s current demands are expected to cost at least $10.2 billion from 2025-2028. Anticipated budget shortfalls and a new, expensive contract with CTU looming can leave taxpayers expecting to see their taxes increased to pay for these new costs.

It is unlikely this new spending will boost student outcomes. Since 2012, CPS spending from state and local sources has nearly doubled, but student proficiency in math is down 78% while student proficiency in reading is down 63%.

At the same time, enrollment at CPS has declined by 80,900 (-20%) from 404,151 students in the 2011-2012 school year to 323,251 students in the 2023-2024 school year. With increased costs, declining student outcomes and massive uncertainty on the horizon, it is likely Chicago families will continue to look elsewhere for the education their children deserve.

District administrators and Johnson would be wise to remember that during CTU contract negotiations.