Chicago Public Schools Fiscal Year 2015 Budget

How to use this site

Users will be able to find documents and use interactive tools to help them better understand the proposed CPS budget for fiscal year 2015. The interactive features allow users to easily click through the budget, drilling into specific budget line details or staying at a high level overview of the District.

Users can view a number of areas of the budget including revenue and debt while also looking at every CPS school and department. Each interactive report generates graphs and charts which will make budget comparisons visual and easier to understand.

Check out our Reader's Guide for more information.

Download your own copy of the FY15 Budget Book Summary.

CPS received the GFOA Distinguished Budget Presentation Award for our FY2014 online budget site.

Fund Balance Statement

 

Maintaining a baseline level of fund balance, or financial reserve, enhances financial stability for any individual or organization. Just as individuals keep a balance in their checking accounts in case of emergencies, Chicago Public Schools (CPS) needs to maintain a baseline amount of funds within its operating account to ensure smooth day-to-day operations. Additionally, financial reserves provide a cushion for year-to-year fluctuations in financial performance. External stakeholders consider a baseline fund balance a hallmark of prudent financial management and a best practice for governmental organizations.

 

CPS adopted the Fund Balance and Budget Management policy1 in August 2008. The goals of this policy are to maintain adequate fund balances in the various funds to provide sufficient cash flow for daily financial needs, to offset significant economic downturns or revenue shortfalls, to provide funds for unforeseen expenditures related to emergencies, and to secure and maintain strong credit ratings. The definition of fund balances in this context is assets in excess of liabilities that can be spent in times of need. As a practical measure to achieve these goals, the Board established the stabilization fund, an assigned fund balance (under Governmental Accounting Standard Board Statement No. 54) within the Operating Fund. The stabilization fund target baseline is a minimum of five percent of the operating and debt-service budgets.

 

Many external stakeholders, such as rating agencies and government watchdog groups, consider five percent as a minimum level of reserves. Rating agencies commonly view fund balances in excess of five percent as appropriate, and the Government Finance Officers Association recommends fund balance levels between five and 15 percent of spending.

 

While CPS acknowledges the importance of maintaining a minimum level of fund balance, it must balance this with advancing its core mission of ensuring that every child graduates college and career ready. Accordingly, as described below, CPS will continue to draw on reserves and will not maintain the stabilization fund balance at the target levels. 

 

Change in Revenue Recognition Period for FY15 Leads to Change in Beginning-Year Fund Balance

For decades, until 2012, second installment property taxes in Cook County were due in November or December. In 2012, however, the County met the statutory August 1 due date, which shifted hundreds of millions of dollars in property tax receipts to the July/August period, as most property taxes are paid right before or after the due date. Under CPS’s current revenue recognition period, property tax revenues are recognized as current revenues as long as they are available within 30 days after a fiscal year ends, or through July 30. That makes the period right around the end of the revenue recognition period particularly volatile, as it coincides with the property tax due date. As reported in recent budgets and Consolidated Annual Financial Reports, this has had the effect of shifting hundreds of millions of dollars in property tax receipts across fiscal years simply because of a shift of a day or two in receipt. Budgeting revenues in the fiscal year becomes extremely difficult because of this volatility and therefore meeting balanced budget and fund balance requirements becomes more challenging.

 

Similarly, federal, state, and local grants have been recognized as revenues when eligible requirements imposed by grantors have been met and as long as they are collected within 30 days of the end of the fiscal year. However, in FY12 the state changed the requirements so that rather than receiving funds up front, CPS would submit claims for federal and state funds and receive reimbursement based on the expenditures claimed. Additionally, in FY13 CPS implemented the new cash basis expenditure reporting required by the state. This means that CPS cannot submit claims until the actual bill is paid, not just when the expenses are incurred. Because of a natural lag between the time when the expenditure is incurred, when the claim can be processed, and when funds are received, millions of dollars in state and federal grant reimbursement were received by CPS after the 30 day revenue recognition period and therefore were not recorded in the same fiscal year as the expenditure.

 

To correct these two issues—volatility in revenue collections and matching of revenues and expenditures within fiscal years—CPS has changed the revenue recognition period to 60 days, through August 29, for the FY15 budget.  

 

As an accounting matter, this means the fund balance available for FY15 will increase to show the anticipated additional August collections. 

 

Table 1: Change in Revenue Recognition Policy Increases FY15 Beginning Fund Balance


Fund Balance by Fund Type

FY14 Estimated End of Year Balance

FY15 Beginning of Year Balance
After Revenue Recognition

 Revenue Recognition

 

648.0

General Fund

308.9

308.9

Workers’ Comp/Tort Fund (adjusted for Revenue Recognition)

27.4

33.42

Supplemental General State Aid (SGSA)

47.7

47.7

Other Special Revenue Funds

28.2

28.2

Not Available for Appropriation3

107.4

107.4

Total Operating Fund

519.6

1,173.6

Debt Service Funds

219.4

219.4

 

FY15 Use of Fund Balance
At the time the FY14 budget was adopted, CPS anticipated using all available fund balance in the General Fund in order to balance the budget. However, with the new revenue recognition period, better than estimated results in FY13, and FY14 projected to finish better than budget (but still in a deficit requiring draw down of fund balance), CPS will begin FY15 with a positive fund balance.

 

Unfortunately, in order to balance the budget in FY15, and largely due to a growing pension contribution and flat or declining revenues, CPS must turn once again to fund balance. The FY15 budget relies on $797.7 million in unrestricted fund balance, including the amount available from the new revenue recognition period. This leaves $159.2 million available to meet the General Fund Stabilization target.    

 

Table 2: Estimated Use of Fund Balance


Fund Balance by Type

FY14 Beginning of Year Balance

FY14 Estimated Use

FY14 Estimated End of Year Balance

FY15 Budgeted Use

FY15 End of Year Balance

Revenue Recognition

 

 

 

648.0

 

General Fund-for Appropriation

713.2

404.3

308.9

797.7

0.0

General Fund-for Stabilization

 

 

 

159.2

159.2

Workers’ Comp/Tort Fund (adjusted for revenue recognition)

65.0

37.6

33.4

0.0

33.4

Supp’l General State Aid (SGSA)4

49.1

1.4

47.7

40.6

0.0

Other Special Revenue Funds

14.4

(13.8)

28.2

24.0

4.2

Not Available for Appropriation5

107.4

0.0

107.4

0.0

107.4

Total Operating Fund

949.1

429.5

519.6

1,021.5

304.2

Debt Service Funds

269.2

53.8

219.4

54.0

145.8

 

Fund Balance Targets

The fund balance targets established in the policy address the General Fund, Workers’ Compensation/Tort Fund, Supplemental General State Aid (SGSA) Fund, Debt Service funds, and Capital Projects funds. For the General Fund, the fund balance target is set between 5 and 10 percent of the total operating and debt service budgets. For the Workers’ Comp/Tort Fund, the fund balance target is between 1 and 2 percent of the operating budget. For SGSA, the fund balance target is the full fund balance from the prior year. For the debt service funds, the amount should be sufficient to cover potential risks, as determined by the Treasury Department. All capital projects funds are re-appropriated for capital projects.

 

Given these targets and the fund balance estimates above, Table 3 below summarizes the fund balance status compared to targets for the relevant funds for FY15.

 

Table 3: Status of Fund Balance Compared to Targets


Fund Type

Estimated Balance at 6/30/2014

FY15
 Fund Balance Target

Estimated Balance at 6/30/2015

General Fund

$956.9

$318.0 (5%)

$159.2

Workers’ Comp/Tort Fund

$33.4

$6.6 (1%)

$33.4

Supplemental General State Aid Fund

$40.66

$40.6

$0

Debt Service Funds

$219.4

Enough to cover risks

$145.8

 

Once again, the General Fund and the Workers’ Comp/Tort Fund will not meet the fund balance targets at the end of FY15. CPS will ask the Board to extend the deadline to replenish the fund balance for FY15 and FY16 while it continues to seek a solution to the pension challenges and restore financial stability to the District.

 

State Payment Delay No Longer a Drain on Fund Balance

For a number of years beginning in FY09, the state delayed certain payments to CPS (block grants) beyond the 30 day revenue recognition period, which meant millions of dollars in revenue were anticipated in one fiscal year but not received until the next. However, by FY13 the state had largely caught up on the back payments owed, and by FY14 was completely current. Therefore, the state payment delay summary table below is presented simply as a matter of historical record and not because it is a factor in fund balance estimates for FY15.

 

History of State Year-End Obligation to CPS


(in millions)

2005

2006

2007

2008

2009

2010

2011

2012

2013

Amount Owed on 6/30

21.5

7.0

19.0

23.3

173.0

369.4

327.5

164.9

51.4

Amount Owed on 7/30

5.2

6.9

3.7

1.2

173.0

236.2

176.1

111.7

1.89

Amount Owed on 8/31

0.0

0.0

0.0

0.0

0.0

102.2

70.0

51.2

0

 

FY15 Plans for Replenishing the Fiscal Stabilization Fund

In addition to developing a long-term strategic plan to restore fiscal stability, CPS will continue the following policies in FY15:

 

  • Work with the Chicago Teachers Union, the Governor, and the General Assembly to develop and implement pension reform to reduce current and prospective pension obligations of CPS.
  • Encourage the state to maintain a regular payment schedule and to increase funding for education.
  • Provide moderate capital investment, consistent with the proposed FY15-19 Capital Improvement Program, and seek outside sources of funding wherever feasible.
  • Secure private foundation grants to pay for enrichment programs as much as possible.
  • Closely monitor spending to achieve savings and efficiencies wherever possible.

 

1Board Report 08-0827-PO8

2Includes $6 million of increased fund balance due to revenue recognition.

3This includes funds set aside to pay for open purchase orders, services/goods received but not yet paid, and restricted grants/funds received but not spent.

4This fund balance must by statute be re-appropriated to the schools in the budget year where it was unspent in the current year.

5This includes funds set aside to pay for open purchase orders, services/goods received but not yet paid, and non-spendable fund balance, including endowments and prepaid assets.

6Fund balance is estimated to be $47.7 million, but $7.1 million is expected to be held in obligations.

Page Last Modified on Thursday, August 28, 2014