Just two days before a new Chicago school board is sworn in, a report is laying out the stark financial challenges members will face and recommends the board make cuts to staff and operations while advocating for the state to help take on some costs.
The report by the Civic Federation, a prominent government fiscal watchdog, set the stage for incoming board members by identifying several areas causing fiscal turmoil: staffing increases, declining enrollment, underutilized and aging buildings, high debt costs and chronic underfunding.
Since 2021, the school district’s financial difficulties have been masked by $2.8 billion in federal COVID relief money, much of which went to beef up staffing. That money runs out this year. The district is now facing yearly deficits of at least $500 million before factoring in the added costs of the Chicago Teachers Union contract, which is being negotiated. The report warns against taking on additional “obligations,” such as promises to increase staff or provide raises, through an expensive teachers contract.
The Civic Federation warned of dire consequences if this troubling period is mishandled, even as the financial picture for Chicago Public Schools is better than it was a decade ago. This could include a state “takeover” of CPS’ financial management that “is not and should not be out of the question.” Still, the Civic Federation wrote that would be a “drastic response, which could stabilize the district but harm its reputation.”
“You don’t want to generate a sense of panic,” said Joe Ferguson, president of the Civic Federation. “But there should be some sense of urgency about the magnitude of the problems here, and the new board needs to be thinking in those terms. And we are here because of an endless sequence of transactional thinking at the margins, in which things just get worse and worse and worse. We’re at the end of that road, and an essential part of the larger fix that is likely needed.”
The state historically has only taken over school districts when they are at the brink of bankruptcy. The report also said a combination of budget cuts, coupled with more state funding, could avoid a “worst-case scenario” in which the financial outlook worsens to the point that CPS loses access to borrowing, which in the past has triggered a state “takeover.”
Ferguson said the state may want to provide additional oversight if it provides more money, noting that state involvement could take many forms.
“It can be calibrated to whatever scope of responsibility or power that might be needed,” he said. But the state will need “guard rails that assures that money will be well used, and that things will proceed in a fiscally responsible manner.”
Despite the dire warning, CPS also has positives. Its fund balance has grown from a negative balance in 2016-17 to $1.2 billion this year, as noted in the report. And the state has been increasing education funding every year since 2018, though not to the level the state says CPS needs.
There also may be some momentum in Springfield for state lawmakers to start paying more for Chicago teacher pensions. The state covers pension costs for all other school districts but only partly for CPS. This year, CPS contributed about $662 million for teacher pensions.
The Civic Federation analyzes the school district’s budget annually and has in the past pointed out that there are fewer students but increasing costs, urging CPS to be more “efficient.”
In its latest report, the group pointed out that the school district has 9,100 more staff now than in 2019. Meanwhile, student enrollment has dropped by more than 85,000 since 2010 and CPS debt load has grown by 45% between 2014 and 2023. The majority of the new jobs are clinicians and school support staff, such as social workers, teaching assistants and special education classroom assistants. The number of central office and network staff has also increased by 64% over this time, the Civic Federation said.
CPS CEO Pedro Martinez and his administration have said the staff increases were vital to helping students recover from setbacks during the pandemic. Martinez also argued that staffing is now at appropriate levels and should be maintained. For decades, CPS has been dramatically underfunded, which has meant it had far below the staffing levels experts say is needed to serve a population of mostly low-income students.
The report, however, noted that the school district is also spending a lot on schools with few students. It highlighted 49 schools where their buildings are less than one-third full. There are more than 160 schools that are considered less than 50% at capacity. The smallest school, Douglass High School in the Austin neighborhood, is budgeting more than $93,000 per student. Two other high schools — Uplift in Uptown on the North Side and Air Force Academy on the South Side — spend nearly $50,000.
“CPS’ spending per student exceeds that of peer districts which suggests that there are opportunities for efficiency in resource allocation,” according to the report. “With no sign of an influx in additional revenue from the State of Illinois and otherwise limited sources of revenue, the Board must focus on right-sizing district personnel and operations to align with the student population and facility needs based on the level of fiscal resources available.”
The Chicago Board of Education recently approved a self-imposed school closing moratorium as a state moratorium expires this month. Also, studies find that school closings harm children and don’t save as much as one would expect.
Sarah Karp covers education for WBEZ. Follow her on X @WBEZeducation and @sskedreporter.