CPS projected to end school year with $45M deficit as budget challenges persist

For the second year in a row, Chicago Public Schools is on track to spend more money than is coming in — a sign of the district’s difficult financial situation.

Two financial reports submitted to Board of Education members at last week’s monthly meeting show the school district is struggling to cover all its costs.

These revelations come as district leaders are putting together the budget for next school year, which officials thought would feature a $529 million deficit but recently predicted could be much more.

“CPS continues to face multiple and evolving economic pressures,” a district spokeswoman said in a statement. She said CPS is committed to making the “best use of all funding” and “remains committed to responsible stewardship of public resources while emphasizing investments that directly benefit student learning and school communities.”

Financial experts say CPS and other public school districts are continuing to face financial challenges after they used billions of dollars in one-time federal COVID relief money on ongoing costs such as staff salaries — but now that the money is gone, they’ve yet to adjust spending or secure additional permanent funding.

The $2.8 billion in federal emergency funding that CPS received starting in 2020 helped mask continued structural funding problems.

The last of that money ran out during the 2024-25 school year, during which an audit shows CPS ended the year with an operating deficit of $102 million. That’s the first time since 2017 — the year the state revised its funding formula and started increasing education funding — that CPS had an audit that showed a deficit.

Meanwhile, a quarterly financial report shows the district is projecting that it will again end the current fiscal year on June 30 in a hole, albeit a smaller one, of $45 million. CPS says it is making up some ground by spending less grant money.

CPS officials say this year’s projected deficit might shrink as the school year closes. But CPS is also $118 million over budget on staff, which it attributes to increased spending on workers who serve students with disabilities.

Facing budget reality

CPS budget officials in 2025 over-estimated how much the school district would get from a state tax on business income, state aid and federal funding, according to the audit.

The district was able to make up some ground by spending less on equipment, insurance and repairs and by increasing facility rental fees, according to the audit. It was also helped by getting $7.2 million from a lawsuit.

Because of the difference between revenue and expenditures in its operating budget and other areas, CPS saw a $331 million reduction in its fund balance, which is basically its savings account. It ended the 2024-25 year with a fund balance of $2.2 billion.

CPS also had $450 million in outstanding short-term loans at the end of the last fiscal year. The district typically uses this borrowing to cover payroll and then pays back the loans when Cook County property tax revenue comes in. But Cook County had technical issues that caused a five-month delay in getting those funds to taxing bodies — which prevented CPS from paying off the loans sooner.

Ashlee Gabrysch, Midwest region manager for local government ratings at Fitch Ratings, said the credit agency had a double B-plus rating with a negative outlook on CPS even before the news that the district ended the 2025 fiscal year with a deficit.

“They are in a fairly precarious position, given rising expenses … salaries go up, the cost of healthcare goes up, the cost of contracts goes up and there’s inflationary growth,” she said. “The revenue side of things is just not going up hand-in-hand with expenditures.”

Gabrysch said credit rating agencies are keeping a close eye on CPS, as they do any government agency with such a weak credit rating. The school district could be at risk for another downgrade, which could make it more difficult and expensive to borrow.

Already, short-term borrowing costs CPS millions in interest every year. With the property tax delay, CPS is projecting $34 million in interest costs this fiscal year.

Gabrysch acknowledged that CPS is a school district with many needs — an increasing number of students in special education and English language learners — but she noted that it has a “large human capital footprint.”

“They can't maintain that very large footprint with their current revenue picture, and I don't see that revenue picture changing in the near term,” she said.

Joe Ferguson, president of the government fiscal watchdog Civic Federation, said ending the year with a deficit is not in and of itself a big problem with a nearly $10 billion budget. However, it underscores the need for CPS to confront its funding situation.

“The bottom line here is we all need to stop talking about whether or not we are going to spend more, because we don’t have more to spend,” he said. “We really need to be tightening things right now. How much? That is going to depend on a number of factors.”

Ferguson said he thinks board members and CPS officials have yet to talk about curtailing spending to deal with the budget realities.

Officials continue pushing for more state funding

CPS CEO Macquline King had said she hoped to get principals their school budgets by late April, but now some principals say they are hearing budgets may not be available until mid-May. CPS didn’t confirm the delay.

King and board members say they want to keep cuts as far away from classrooms as possible. In the last two budget cycles, officials have said that they have tried to eliminate or scale back anything that students wouldn’t directly feel.

Officials also say CPS desperately needs more revenue.

“Currently, CPS is approximately only 80% funded, and does not receive enough state funding to meet our students' needs based on the state’s own formula,” CPS officials said in a statement.

CPS officials also continue to want the state to pick up more of the district’s teacher pension costs, as it does for other districts statewide.

“Achieving pension parity and reaching 100% funding adequacy are not just fiscal goals — they are essential requirements for long-term equity and stability,” CPS said. “Without these structural corrections from the state, the district will continue to face tight margins that do not reflect the true cost of educating the district’s 315,000 students.”

King and board members have gone to Springfield to advocate for more money, but so far none of the bills that would funnel more funding toward education have been approved by the Illinois General Assembly.