September 18, 2025
Click to read the full report.
EXECUTIVE SUMMARY
On August 28th, 2025, Chicago Public Schools (CPS, or the “District”) passed a balanced budget for its 2026 fiscal year, covering the 2025-2026 school year. The budget successfully closed a $734 million deficit. The District’s choice to avoid short-term borrowing as a deficit-closing method likely prevented a credit downgrade. Highlights from the budget include:
- A $514 million increase in revenue from FY2025, driven by a large bond issuance and increased property taxes;
- A $430 million projected decrease in federal revenue from FY2025 as COVID-19 pandemic funds have been expended;
- A $224 million increase in expenditures, driven primarily by increases in salaries and benefits;
- A decrease of over 1,000 personnel due to cuts to central office staff and district-wide support as measures to balance the budget;
- An assumption of a $379 million TIF surplus, based on the amount CPS received in FY2025; and
- No plan to make a payment of $175 to the municipal pension fund as requested by the City of Chicago, unless additional state or local funding becomes available.
Although the District managed to balance the FY2026 budget, it faces numerous challenges going forward, most notably a continued structural deficit, estimated at $520 million for FY2027 and projected to grow in future years. Other challenges include:
- Severely underfunded pensions as CPS continues to receive less state assistance than other districts in Illinois;
- High debt costs due to low credit ratings;
- Inefficiently allocated resources due to long-term declining enrollment, creating a need for right-sizing operations; and
- Unresolved financial entanglements with the City of Chicago.
Click to read the full report.