Chicago Public Schools Fiscal Year 2016 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 2016. 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.

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Download your own copy of the FY16 Budget Book Summary.

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

Organization Chart

Debt Management

Chicago Public Schools’ (CPS) Capital Improvement Program, described in the Capital chapter, each year funds a variety of investments such as new schools, playgrounds, air conditioning, expanded bandwidth and new computers, academic programs (career and technical education programs, for example), and core investments in our facilities to repair or replace infrastructure and mechanical systems. This work creates a high quality learning environment to support a high quality education.

CPS funds the Capital Improvement Plan largely through the issuance of bonds.  Bonds are debt instruments that are similar to a loan, requiring annual principal and interest payments. Most of these bonds are repaid from General State Aid (GSA). Since GSA is also a major revenue source for core academic priorities, we face a continuing challenge in balancing the day-to-day classroom needs with the need for quality educational facilities.  

Debt Overview

The Board of Education currently has $6.2 billion of outstanding debt.  FY16 includes appropriations of $538 million for alternate bonds and PBC payments.   

CPS continually reviews the affordability of its capital program, minimizes debt issuance costs and monitors existing debt for any cost-saving opportunities as part of its efforts to meet budget challenges. To minimize interest costs, CPS has funded capital expenditures on an interim basis by utilizing fund balance to the greatest extent possible.  The timing of bond sales depends on the market conditions and the need to reimburse for capital expenditures.

Debt Profile

CPS has established the following debt management goals to balance costs, risks and liquidity needs:

  • To borrow at the lowest cost of funds balanced against acceptable risk levels
  • To maintain an appropriate allocation of debt products and to refinance existing debt when current market conditions are advantageous
  • To maintain the strongest credit ratings possible, given current financial constraints
  • To fund a capital plan that balances the need for new construction with the affordability of additional debt issuance

Types of Obligations

The Board is authorized by state law to issue notes and bonds and to enter into lease agreements for capital improvement projects.  CPS issues Alternate Revenue General Obligation Bonds.  As with most school districts, CPS issues bonds backed by the full faith and credit of the Board, otherwise known as General Obligation (GO) Bonds.  These GO bonds are paid for from all legally available revenues of the Board.  

CPS issues a special type of GO bond called an “Alternate Revenue” GO Bonds.  These bonds are backed by two revenue sources and offer a number of other bondholder protections.  The first revenue source is a property tax levy which is available to support debt service should the Alternate Revenue not be available.  In addition to the property tax levy, CPS uses “Alternate Revenues” to repay its bonds (e.g. GSA).  With these revenues available to pay debt service, the property tax can be and is abated every year.  As a result, CPS bonds have two dedicated revenue sources, property taxes and the specific alternative revenue, which provide an additional layer of security for bondholders.  The Board is authorized to issue Alternate Revenue Bonds after adopting a resolution and satisfying public notice publication and petition period requirements in lieu of a voter referendum, which is typical in other school districts.

The Alternate Revenues supporting CPS bonds are GSA, Personal Property Replacement Taxes (PRRT), revenues derived from intergovernmental agreements with the City of Chicago, property taxes and federal interest subsidies. The majority of CPS bonds are backed by GSA.  In FY2016, GSA will account for $297 million in debt service, which would normally be paid from GSA revenues.  However, only $43 million in debt service will be paid from GSA; the remainder will be paid from $40 million of capital fund balance transfer, $14 million from the debt service stabilization fund and other reserve releases, and $200 million from a restructuring of FY2016 debt service.  

In addition to debt service funded by GSA, $58 million of debt service is paid from PPRT.  Debt service paid for from PPRT revenues also reduces PPRT revenues available for operating purposes.  Additionally, $91 million in debt service is paid by revenue resulting from Intergovernmental Agreements with the City of Chicago.

The Public Building Commission (PBC), a local government entity which manages construction of schools and other public buildings, has in the past sold bonds which rely on CPS property tax levies. No PBC bonds have been issued since 1999 and these bonds expire in 2020.  The FY16 budget includes $52 million in payments for principal and interest on these bonds.  

CPS has benefitted from issuing bonds with federal interest subsidies, resulting in a very low cost of borrowing.  These include Qualified Zone Academy Bonds (QZABs), which provide capital funding for schools in high-poverty areas, Qualified School Construction Bonds (QSCBs), and Build America Bonds (BABs), the latter two created by the American Recovery and Reinvestment Act of 2009 (ARRA).  With the expiration of ARRA, new QSCBs and BABs are no longer available, although the federal government continues to pay the interest subsidy to CPS.  The FY16 budget includes $25 million of federal subsidies for debt service.

As a result of the passage of PA 98-0018 in June 2013, CPS began annually receiving State School Infrastructure Fund monies as part of the State School Construction Program.  CPS received approximately $13.3 million in FY15.  CPS anticipates it will continue to receive approximately $13.3 million annually.  Revenues are being applied toward the funding of the construction of new schools and other projects.  If needed, CPS can issue debt to be paid for from these revenues.

Debt Management Tools and Portfolio Mix

As part of the Debt Management Policy, CPS is authorized to use a number of tools to manage its debt portfolio including refunding of existing debt, issuing fixed or variable-rate bonds, and issuing short-term or long-term debt. These tools are used to manage various types of risks, to generate cost savings, and to assist capital asset planning.  

Typically, CPS issues fixed-rate bonds which pay a set, agreed-upon interest rate according to a schedule established at the time of debt issuance.  However, about 18 percent of CPS’s debt is variable rate, which means that the interest rate is not set and can fluctuate.  The interest rate on variable rate debt is often lower than what can be achieved in a fixed rate market, but the rate can be highly volatile.  CPS plans to convert its outstanding variable rate debt to a fixed rate as it comes time to refinance these bonds.

Chart 1: Summary of Fixed Rate, Variable Rate and Swapped Debt

(as of April 21, 2015)

Additionally, the Board entered into 10 interest rate swaps from 2003 to 2007.  An interest rate swap is an agreement between two parties (known as counterparties) where one stream of future interest payments is exchanged for another based on a specified principal amount.  The Board’s swaps generally convert the variable rate paid to bondholders to a fixed rate through the exchange of interest payments with its counterparties.  No swaps have been entered into since 2007 and the district will no longer use swaps.

Approximately 18% of the Board’s outstanding debt as of April 21st was swapped.  The Board has entered into ten interest rate swap agreements which contain a provision that if the Board’s credit rating is withdrawn or reduced below set thresholds the counterparty can terminate the swap agreement.  This would result in the swap being paid off early.  Depending on market conditions, CPS could either be owed money or could owe money to the counterparty.

CPS’ recent downgrades by Moody's and Fitch to “Baa3” and “BBB-,” respectively, are below the thresholds set in eight of the ten swap agreements. In March, when these thresholds were reached, CPS would have owed the counterparties approximately $228 million if they demanded payment at that time.  However,   prior to the downgrades, the Board began discussions with the counterparties to amend the existing interest rate swap agreements.  Currently, those discussions are ongoing and additional consideration has been given to ending the interest rate swap agreements through an orderly and systematic approach.

Credit Ratings

The Debt Management Policy of CPS provides guidance for debt management as well as capital planning and supports the Board’s ability to manage its debt in a conservative and prudent manner.  One of the goals of the policy is to ensure that CPS maintains the highest possible credit rating among the credit agencies. These agencies are independent entities and their purpose is to give investors, or bondholders, an indication of the creditworthiness of a government entity.  A high credit score can lower the cost of debt issuance, much the same way a strong personal credit score can reduce the interest costs of loans and credit cards.  Ratings consist of a letter “grade”, such as A or BBB or BB, and a credit “outlook”, or expectation of the direction of the letter grade.  Thus, a “negative outlook” anticipates a downgrade to a lower letter grade, a “stable outlook” means the rating is expected to remain the same, and a “positive outlook” may signal an upgrade to a higher, better rating.

CPS meets frequently with the credit rating agencies about its budget, audited financial results, debt plan, and management initiatives to ensure the agencies have the most updated information possible.  The primary rating factors for CPS concern management, debt profile, financial results and economic and demographic factors.

CPS’s current credit ratings from Standard and Poor’s, Fitch Ratings, Moody’s Investor Service and Kroll Bond Rating Agency (added in FY15)  are  BBB, BB+, Ba3 and BBB+ respectively.  Just as a high credit ratings can mean lower borrowing costs, deterioration in credit ratings have started to lead to an increase in interest expenses for CPS.  

FY16 Challenges

FY2016 presents a challenging environment for CPS to maintain ratings and issue bonds.  CPS faced a series of downgrades in FY2015 due to a sizeable budget gap, continued drawdown on reserves, and limited ability to raise revenues.  These downgrades increase CPS’ cost of borrowing, further increasing revenues needed to pay debt service.  Without additional State support for pensions and education funding that enable CPS to close the budget gap, these downward rating trends will continue and further increase interest costs.  

Additionally, as CPS continues to issue debt to invest in the District’s facilities, debt service will rise annually.  Because CPS funds its debt from GSA, each additional dollar of debt service reduces GSA dollars available for the classroom.  In FY2016, approximately $297 million of GSA is required to fund debt service, representing 43% of the district’s unrestricted GSA.  By 2020, $427 million of GSA will be required to fund debt service, nearly 70% of unrestricted GSA.   Similarly, approximately $58M (in FY2016 through FY2020) of Replacement Taxes are used for debt service, revenues that would otherwise be available for operating purposes.

In FY2016, the budget assumes that CPS will use approximately $254 million of one-time resources and debt restructuring to reduce the amount of GSA used for debt service and free up this money for operating purposes.  These include a $40 million transfer of capital fund balance to debt service, a $14 million transfer from the Debt Service Stabilization Fund (DSSF) and other reserves and a $200 million restructuring of outstanding debt.  The $200 million restructuring will pay down FY2016 principal and interest with new longer dated bonds in order to generate near-term FY2016 relief to the operating budget.  However, the new bonds will carry additional debt service which increases the debt burden in future years.  

In previous years, CPS received a modest amount of state revenues for school construction through the state’s School Construction Program to offset the amount of GSA needed for debt service.  In FY2015, $59 million of these revenues were applied toward the repayment of existing debt and helped to increase the amount of GSA available for operating purposes.  In FY2016, no state School Construction revenues are available to offset GSA-funded debt service.    

Due to CPS’ current ratings, CPS has implemented a strategy of unwinding its outstanding swap portfolio and converting most variable rate debt to a fixed rate.  In FY2015, the recent downgrades triggered automatic terminations which CPS is the process of negotiating with the swap counterparties.  Certain of these termination payments will be paid for through the DSSF and sothers will be paid for through bond proceeds.  

The draw down on reserves and fund balance to help support the operating fund presents liquidity challenges as discussed in the Cash Management Chapter.  In order to provide sufficient liquidity to cover daily operating expenses, CPS will issue up to $935 million in working capital lines of credit.  These working capital lines of credit are issued as Tax Anticipation Notes (TANs) which are repaid from property taxes.  The pending line of credit will be repaid from the 2015 tax year which is collected largely in FY2016.  

FY16 Debt Service Costs

As shown in the table below, FY16 includes total appropriations of $538 million for alternate bonds and PBC payments.

CPS is required to set aside debt service a year in advance for GSA funded debt and one-and-a-half years in advance for PPRT funded debt service.  These payments are held in trust with an independent trustee, as required by the bond indentures.  Therefore, the FY16 Revenues shown for the Debt Service Funds represent the amount that is to be set aside for these future debt payments.

Because of this set-aside requirement, the majority of the appropriations for FY16 represent the amount that is to be paid during FY16 from revenues set aside in the prior year. Table 1 provides information on the debt service fund balance at the beginning of the year, the expenditures that are made from the debt service fund and the revenues that are deposited to the fund to largely fund the debt service requirements for the following fiscal year.  


Table 1: FY14 - FY16 Summary of Revenues Set Aside and Appropriations for Debt Service Funds (In Millions)

FY14 Actual FY15 Estimated FY16 Budget
Beginning Restricted Fund Balance 537.3 501.6 538.5
Fund Outflows:
Existing Bond Principal payment 148.3 154.7 146.6
Existing Bond Interest payment 315.9 367.9 389.0
Total Existing Bond Debt Service 464.2 522.6 535.6
Fees 3.7 3.1 3.0
Total Appropriation for Debt Service Funds 467.9 525.7 538.6
Total Transfer In/(Out) from DSR 15.1 21.1 47.1
Fund Inflows:
Property Taxes 52.1 55.2 52.0
PPRT 57.0 58.3 58.3
GSA 119.1 175.3 42.9
State Capital Reimbursement 54.0 59.2 -
Other Local (City IGA and Interest Earnings) 110.1 116.9 95.5
Federal Interest Subsidy 24.8 24.7 24.8
Total Revenue 417.1 489.6 273.5
Other Financing Sources (capitalized interest, Bond premium): - 9.3 294.5
Revenue Recognition - 42.6
Ending Restricted Fund Balance 501.6 538.5 615.0

In FY15, the Board changed its revenue recognition period from 30 days to 60 days which will mean approximately $43 million of property tax revenues, as well as IGA revenues from the City, will be added to fund balance.  

Debt Service Stabilization Fund (DSSF)

The DSSF is an internal fund managed by the Board to provide funding for various debt and liquidity needs as they arise. It is not a fund established under any bond documents and there are no bond requirements associated with this fund.  

The DSSF is used for multiple purposes, including acting as a reserve for unexpected debt payments and a revolving fund to provide liquidity for operating and debt financing activities. It can also be used to help support swap termination payments.    The table below shows the appropriations that represent actual expenditures and will draw-down the balance in the fund.  These are shown separately as “Expended.” “Revolving” appropriations reflect payments that are required to be deposited in the debt service funds according to bond documents, but are provided in excess of actual debt service and are returned or “revolved” to the DSSF after all debt service has been paid.


Table 2: Debt Service Stabilization Fund (DSSF) Presentation (In Millions)

FY14 Actual FY15 Estimated FY16 Budget
Beginning Fund Balance 198.9 183.8 57.1
Revenues 48.3 32.5 -
Total Appropriations 0.2 0.2 0.5
Other Transfers In/Out
Revolving (9.2) (7.2) -
Expended (54.0) (151.8) (47.1)
Ending Fund Balance 183.8 57.1 9.5

Future Debt Service Profile

GSA and PPRT revenues needed to pay bondholders are in direct competition with resources needed to ensure we continue to fund priorities that drive academic achievement.  GSA and PPRT revenues needed to fund debt increases significantly from $356 million in FY16 to $480 million in FY2020.

The following graph illustrates the fiscal challenges of CPS’s debt obligations on currently outstanding bonds.  This graph does not show the impact of any future bonds required to support future capital budgets or debt restructuring.

Measuring Debt Burden

External stakeholders such as taxpayers, unions, parents, government watchdog groups, rating agencies, and bondholders frequently review CPS’s debt profile to gauge its size and structure as a crucial component of CPS’s financial position.  In addition to evaluating the total amount of debt outstanding and the annual debt service payments, those evaluating CPS’s financial picture also look at our “debt burden.” The purpose is to gauge how much taxpayers bear in debt costs and determine how much debt is affordable for residents, which establishes true debt capacity.  Several methods of measuring debt burden are commonly employed for school districts; these include comparing existing debt to legal debt limits, measuring debt per capita and measuring debt as a percentage of operating expenditures.  

Legal Debt Limit

The Illinois School Code imposes a statutory limit of 13.8 percent on the ratio of the total outstanding property tax-supported debt that a school district may borrow compared with a school district’s equalized assessed value, which generally represents a fraction of total property value in the district.  Because the Board has issued alternate revenue bonds for which property tax levies are not extended, these bonds do not count against the legal debt limit imposed by the Illinois School Code.  Therefore, total property tax supported debt is extremely low at less than 1 percent of the legal debt limit.

Debt Per Capita

The Board’s per capita debt burden, or total debt divided by the City of Chicago’s population, has increased in the last decade.  As reported in the FY14 Comprehensive Annual Financial Report, general obligation debt per capita decreased slightly by $42 from FY13 to $2,205. This is still considered moderate to slightly above average relative to other comparable school districts.

Debt as a Percent of Operating Expenditures

Another way of measuring the total debt burden is by dividing annual debt service expenditures by operating fund expenditures. Based on this method, the debt burden for FY15 and FY16 are estimated at 9.1 and 11.1 percent of total operating expenditures respectively, reflecting the increased debt burden as a result of recent bond issues.

A copy of the Debt Management Policy is available at the Board’s website at


Outstanding Debt as of June 30, 2015

Debt Outstanding at 06/30/2015 Chicago Public Schools Closing Date Maturity Date Principal Outstanding Pledged Funding Source for Debt Service
PBC Series A of 1992 1/1/1992 1/1/2020 123,875,000 Property Tax
PBC Series B of 1999 3/1/1999 12/1/2018 72,595,000 Property Tax
Unlimited Tax G.O. Series 1997A* 12/3/1997 12/1/2030 11,131,899 IGA / PPRT
Unlimited Tax G.O. Series 1998B-1* 10/28/1998 12/1/2031 257,043,662 IGA / PPRT
Unlimited Tax G.O. Series 1999A* 2/25/1999 12/1/2031 419,559,983 IGA / PPRT
QZAB Series 2001B 10/24/2001 10/23/2015 9,440,000 State Aid
Unlimited Tax G.O. Series 2002A 9/24/2002 12/1/2022 31,670,000 IGA
QZAB Series 2003C 10/28/2003 10/27/2017 4,585,000 State Aid
Unlimited Tax G.O. Refunding, Series 2004A 4/6/2004 12/1/2020 131,735,000 PPRT / State Aid
Unlimited Tax G.O. Series 2005AB 6/27/2005 12/1/2032 203,820,000 PPRT / State Aid
QZAB Series 2006A 6/7/2006 6/1/2021 6,852,800 State Aid
Unlimited Tax G.O. Series 2006B 9/27/2006 12/1/2036 305,875,000 State Aid
Unlimited Tax G.O. Series 2007B 9/4/2007 12/1/2024 197,765,000 IGA / PPRT
Unlimited Tax G.O. Series 2007C 9/4/2007 12/1/20 4,540,000 IGA / PPRT
Unlimited Tax G.O. Series 2007D 12/13/2007 12/1/2029 187,375,000 State Aid
Unlimited Tax G.O. Series 2008A 5/13/2008 12/1/2030 262,785,000 IGA / PPRT
Unlimited Tax G.O. Series 2008B 5/13/2008 3/1/2034 200,775,000 State Aid
Unlimited Tax G.O. Series 2008C 5/1/2008 12/1/2032 464,655,000 State Aid
Unlimited Tax G.O. Series 2009D 7/29/2009 12/1/2022 52,465,000 State Aid
Unlimited Tax G.O. BAB Series 2009E 9/24/2009 12/1/2039 518,210,000 State Aid / Federal Subsidy
Unlimited Tax G.O. Series 2009F 9/24/2009 12/1/2016 12,325,000 State Aid / Federal Subsidy
Unlimited Tax G.O. QSCB Series 2009G 12/17/2009 12/15/2025 254,240,000 State Aid
Unlimited Tax G.O. QSCB Series 2010C 11/2/2010 11/1/2029 257,125,000 State Aid
Unlimited Tax G.O. BAB Series 2010D 11/2/2010 12/1/2040 125,000,000 State Aid
Unlimited Tax G.O. Refunding Series 2010F 11/2/2010 12/1/2031 176,630,000 State Aid
Taxable Unlimited Tax G.O. Refunding Series 2010G 11/2/2010 12/1/2017 38,590,000 State Aid
Unlimited Tax G.O. Series 2011A 11/1/2011 12/1/2041 402,410,000 State Aid
Unlimited Tax G.O. Refunding Series 2011C-1 12/20/2011 3/1/2032 47,200,000 State Aid
Unlimited Tax G.O. Refunding Series 2011C-2 12/20/2011 3/1/2032 44,100,000 State Aid
Unlimited Tax G.O. Series 2012A 8/21/2012 12/1/2042 468,915,000 State Aid
Unlimited Tax G.O. Series 2012B 12/21/2012 12/1/2035 109,825,000 State Aid
Unlimited Tax G.O. Series 2013A-1 5/22/2013 3/1/2026 106,930,000 State Aid
Unlimited Tax G.O. Series 2013A-2 5/22/2013 3/1/2035 124,320,000 State Aid
Unlimited Tax G.O. Series 2013A-3 5/22/2013 3/1/2036 157,055,000 State Aid
Unlimited Tax G.O. Series 2015A 3/26/15 3/1/2032 89,200,000 State Aid
Unlimited Tax G.O. Series 2015G 3/26/15 3/1/2032 88,900,000 State Aid
Unlimited Tax G.O. Series 2015CE 4/29/15 12/1/2039 300,000,000 State Aid
Total Principal Outstanding 6,269,518,344

*Excludes accreted interest accrued on 0% coupon capital appreciation bonds.


Schedule of Debt Service Requirements to Maturity*

as of June 30, 2015

($ in Thousands)

Fiscal Year Ending June 30 Total Existing General Obligation Bond Principal Total Existing General Obligation Bond Interest Total Existing G.O. Bond Debt Service PBC Leases Total
2016 118,511 289,451   407,962 51,998 511,958
2017 155,468 279,999   435,467 52,018 539,503
2018 171,547 265,459   437,006 52,070 541,146
2019 177,585 259,908   437,493 52,099 541,691
2020 190,251 268,047   458,298 30,636 519,570
2021 215,500 276,907   492,407 - 492,407
2022 201,858 270,798   472,656 - 472,656
2023 210,468 264,478   474,946 - 474,946
2024 216,997 254,018   471,015 - 471,015
2025 225,483 246,773   472,256 - 472,256
2026 502,773 237,170   739,943 - 739,943
2027 258,915 227,244   486,159 - 486,159
2028 268,245 219,197   487,442 - 487,442
2029 227,667 265,013   492,680 - 492,680
2030 491,232 252,190   743,422 - 743,422
2031 270,124 238,258   508,382 - 508,382
2032 235,915 274,371   510,286 - 510,286
2033 141,920 94,570   236,490 - 236,490
2034 149,325 88,650   237,975 - 237,975
2035 157,100 82,110   239,210 - 239,210
2036 165,210 74,782   239,992 - 239,992
2037 162,740 66,574   229,314 - 229,314
2038 189,600 56,974   246,574 - 246,574
2039 200,140 46,141   246,281 - 246,281
2040 211,270 34,773   246,043 - 246,043
2041 176,070 24,076   200,146 - 200,146
2042 185,860 14,473   200,333 - 200,333
2043 195,275 4,882   200,157 - 200,157
2044 - -   - - -
2045 - -   - - -
TOTAL $6,073,049 $4,977,286   $11,050,335 $238,821 $11,527,977

*Source: FY 2015 CAFR


Page Last Modified on Tuesday, July 26, 2016