September 4, 2020
In a recent analysis of the Chicago Public Schools FY2021 budget, the Civic Federation supported the District’s proposed $8.4 billion budget. However, the Federation expressed serious concerns about the budget’s reliance on $343 million in uncertain federal funding not yet approved by Congress and that several of the District’s revenue sources that have been impacted by the coronavirus pandemic.
Prior to the COVID-19 pandemic, Chicago Public Schools had reached more stable financial footing than in previous years due to an influx in State-approved funding. Public Act 100-0456, passed in August 2017, instituted the new Evidence-Based Funding formula for statewide P-12 education funding, as well as additional funding for the Chicago Teachers’ Pension Fund normal cost and an increase to the CPS property tax levy dedicated to teachers’ pension funding. The economic crisis caused by the pandemic has resulted in uncertainty with the two major sources on which the District depends to fund its schools and programs each year—state funding and property tax revenue.
These revenue risks and challenges are underscored by the fact that the CPS budget is increasing significantly by 6.9% compared to the FY2020 budget of $7.8 billion that was amended in fall 2019 to include new provisions for the collective bargaining agreements with the Chicago Teachers Union and the Service Employees International Union. Approximately half of the spending increase in FY2021 is for personnel salaries, due in large part to the addition of 1,702 new full-time equivalent positions. Other categories of spending are also increasing significantly in FY2021, including contracts, contingencies and commodities. The cost of salaries for all CPS employees is rising by $262.6 million, or 9.9%, in FY2021 over the prior year. This is the largest annual increase for total salaries in the past five years, although in the five-year period since FY2017, total salary spending has increased cumulatively by 23.5%.
The collective bargaining agreement reached with the Chicago Teachers Union in fall 2019 for FY2020 through FY2024 was expected to require an additional $558.3 million over the five-year contract period. At the time the contract was approved, the District expected that its State and local revenue would grow by $200 to $250 million annually. However, those revenue growth expectations have been seriously compromised by the economic impact of COVID-19.
Even absent the pandemic, CPS would be grappling with ongoing budget issues: using large amounts of short-term borrowing to cover cash-flow needs during the year; underfunded teachers’ pensions; declining enrollment (enrollment has decreased by 11.8% in the past ten years); rising costs due to personnel and inflation; building utilization imbalances that impact capital needs and spending; and increasing costs for debt service to cover capital spending.
If the $343 million in new federal funding the budget is counting on does not come through by this fall, school district officials and the Board of Education have said CPS has a Plan B in place that would involve using one-time sources to fill the budget hole, such as reserves or grant contingencies, and potentially budget cuts. However, the District has not clearly detailed to the public what measures would be used and what budget cuts specifically would need to take place.
The Civic Federation believes it is imperative for the federal government to provide revenue loss support to state and local governments including school districts. The U.S. government is the only entity that can take action to help all state and local governments maintain programs and services and avoid a worse recession tied to reduced state and local government spending. However, if Congress fails to act, the Civic Federation believes that CPS should publicly discuss the specifics of the Plan B actions that would be taken to balance this year’s budget so that stakeholders in the CPS community fully understand the impact.
The Federation is further concerned that a continuation of current spending trends will be unsustainable over the long term without sufficient revenue growth to match. Future revenues are in jeopardy assuming that economic recovery takes several years and revenue growth continues to stagnate. We urge the District to produce a public multi-year plan outlining options the District can use to balance its future budgets in the event of continued revenue stagnation or declines.
The Chicago Board of Education approved the Chicago Public Schools’ FY2021 budget on August 26, 2020. The 2021 fiscal year began on July 1, 2020 and runs through June 30, 2021.
 Chicago Board of Education Meeting, August 26, 2020.