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.

Check out our Reader's Guide for more information.

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

Revenue

One of CPS’s biggest financial challenges – aside from pensions – is that it has little control over its revenue sources. State funding is set by formula, and as shown below, has been declining each year since FY09. Federal funding is also set by formula and is mostly restricted for supplemental services, such as for low income students, or for specific services, such as food. Other than FY09 – FY11 when federal revenues temporarily increased due to the American Recovery and Reinvestment Act stimulus funds, they have otherwise been essentially flat. Property taxes are the main source of local revenue (and the District’s largest single source of revenue overall) and are capped at the rate of inflation1.

Table 1: All Funds by Revenue Source (in Millions)

  FY15 Budget FY15 End Of Year FY16 Budget FY16 vs. FY15 Budget
Local Revenues
Property Tax 2,282.5 2,289.0 2,359.8 77.3
Replacement Tax 188.9 198.9 207.8 18.9
Other Local 368.2 369.9 423.3 55.1
Total Local 2,839.6 2,857.8 2,990.9 151.3
 
State Revenues
GSA 1,022.6 1,008.3 952.2 (70.4)
Capital 135.5 69.0 96.3 (39.2)
Other State 676.4 673.9 1,148.0 471.6
Total State 1,834.5 1,751.2 2,196.5 362.0
 
Federal 897.2 735.8 889.9 (7.3)
 
Investment Income 0.1 0.2 0.2 0.1
 
Total Revenue 5,571.4 5,345.0 6,077.5 506.1
Reserves $940.4 $75.1
Bonds & Other 340.0 849.5

As discussed more fully below, CPS is relying on $480 million in new state pension support to help address the structural budget gap. That support is the main driver of the increase in revenue shown above in Table 1.

Revenues are dedicated to debt service and capital, and the remains are available for the day-to-day operations of CPS, as shown in Table 2. While FY16 total revenues are approximately $6.1 billion, only $5.6 billion are available for operations. The amount needed for debt service in FY16 appears significantly lower than in prior years because CPS will do a bond restructuring and rely on one-time funds to cover the majority of the debt service requirements. This frees up $254.6 million of General State Aid (GSA) that will be available for operating expenses. In addition, state revenue shows a significant increase because the FY 16 budget relies on $480 million in pension support from the state.

Table 2: FY15 Revenue Sources Allocated for Debt, Capital and Operating Funds

$ in millions Total Amount for Debt Service Amount for Capital Balance for Operating Budget
Local Revenues
Property Tax 2,359.8 52.0 2,307.8
Replacement Tax 207.8 58.3 149.5
Other Local 423.3 95.5 82.5 245.2
Total Local 2,990.9 205.8 82.5 2,702.6
 
State Revenues
GSA 952.2 42.9 909.3
Capital 96.3 96.3 0.0
Other State 1,148.0 1,148.0
Total State 2,196.5 42.9 96.3 2,057.3
 
Federal 889.9 24.8 12.5 852.6
 
Investment Income 0.2 0.1 0.1
 
Total Revenue 6,077.5 273.5 191.3 5,612.6

Revenue Projections

This section summarizes the major revenue sources and our estimates for FY16. The estimate for each revenue sources is provided in the Interactive Budget on the CPS budget website: www.cps.edu/budget

FY16 operating revenues are budgeted at $5.6 billion, an increase of $718.7 million from our FY15 budget and $870.7 million more than our estimated end of year FY15 revenues. Most of this is the result of CPS relying on $480 million in pension support from the state, property taxes at the level allowed by the cap, and additional TIF surplus funds.

Table 3: FY16 Operating Revenues Rely on State Pension Support

$ in millions FY15 Budget FY15 Estimated End of Year FY15 Change FY16 Budget FY16 Change to Budget
Property Tax 2,227.3 2,235.8 8.5 2,307.8 80.5
Replacement Tax 132.7 140.6 7.9 149.5 16.8
TIF Surplus 25.0 6.3 (18.7) 87.2 62.2
All Other Local 137.4 156.5 19.1 158.1 20.7
Total Local 2,522.4 2,539.2 16.8 2,702.5 180.2
State 1,507.7 1,491.2 (16.5) 1,577.3 69.6
State Pension Support 0.0 0.0 0.0 480.0 480.0
Federal 863.6 711.1 (152.5) 852.6 (11.0)
Investment Income 0.1 0.2 0.1 0.1 0.0
Total Revenue 4,893.8 4,741.8 (152.1) 5,612.5 718.7

Local Revenues

Property Taxes

Our FY 16 projection for property tax revenue is $2,359.8 million, of which $52 million is dedicated for debt service, resulting in a total of $2,308 million available for operating purposes. This is an increase in operating revenue of $72 million over FY 15 estimated revenues. It is driven by $19 million from taxing at the cap, or the rate of inflation, and $42 million from an estimated value of $1,200 million in new property.

Chicago Public Schools is one of a number of school districts whose ability to levy local property taxes is limited by the Property Tax Extension Limitation Law (PTELL). This law stipulates that the increases in property tax extensions within a district are limited to the lesser of 5% or the increase in the national CPI for the year preceding the levy year. New construction falls outside this extension limit and is taxed at the same tax rate as is permitted by the allowable extension increase under PTELL on existing property. The CPI for 2016 property tax extensions (levied in 2015) is 0.8%, which is the second lowest level in recent history2. As a result, our increase in extensions on existing property for FY 16 will be very low ($19 million), placing even greater pressure on our other major revenue sources, which make up less than half of total revenue.

CPS has a 60 day revenue recognition period. This generally allows us to recognize revenues received prior to August 29, 2016 as FY 16 revenues, and shifts our fiscal year revenues more in line with the year in which property taxes are collected.

Personal Property Replacement Taxes (PPRT)

PPRT revenue is budgeted to increase from $198.9 million expected in FY15 to $208 million in FY16. This includes $58 million set aside for debt service and leaves $150 million for operating purposes. PPRT money being diverted to pay debt service is another example of CPS’s operating budget being negatively impacted by debt costs.

Replacement taxes “replace” money that was lost by local governments when their powers to impose personal property taxes on corporations, partnerships, and other business entities were taken away by state legislation in the 1970’s.

The state collects and distributes PPRT to local taxing districts. Taxing districts in Cook County receive 51.7 percent of collections, which is divided among the County’s taxing bodies based on each district’s share of personal property collections in 1976. CPS receives 27.1 percent of the total Cook County share, which is equivalent to 14 percent of the statewide total.

The PPRT includes an additional state income tax on corporations and partnerships, a tax on businesses that sell gas or water, a 0.5 percent fee on all gross charges for telecommunications services excluding wireless services, and a per-kilowatt tax on electricity distributors. The primary driver of PPRT is corporate income tax receipts, which are closely tied to corporate profits.

FY 16 projections of $208 million are driven largely by anticipated growth in US Domestic Profits of 6%3. The electricity excise tax for the State of Illinois drives approximately 12% of PPRT revenue and its receipts are expected to increase 0.5%. The state’s telecommunications tax drives only 1% of PPRT collections, but is projected to decline year over year as customers begin to shed landlines in favor of wireless and online communication.

TIF Surplus and Other Local Revenues

Mayor Emanuel is dedicated to declaring a surplus of TIF funds each year.  In July, 2015 the Mayor further announced a freeze on new spending in downtown TIF districts that would lead to an estimated $250 million extra in TIF surplus over five years.  CPS expected to receive approximately $125 million from these new TIF surplus dollars on top of the funds already projected.  TIF surplus in FY 16 is budgeted at $87.2 million, a significant increase over our expected FY15 revenue.  However, much of this is driven largely by the timing of payments. TIF surplus payments generally fall in August, with some small portion falling outside our revenue recognition period in September. However, we expect FY 15 TIF surplus revenue to come entirely in September, thus suppressing the FY 15 base and inflating the FY 16 TIF surplus revenue, for a difference of $81 million.  Independent of timing, TIF surplus funding is substantially higher than the $25 million budgeted in FY15.

“Other local revenues” also includes the pension payment made by the City of Chicago on behalf of CPS employees to the Municipal Employees pension fund (discussed in the Pension chapter) and is estimated to be $55 million. It is recorded as revenue as required by the Governmental Accounting Standards Board (GASB).   

A portion of the increase is due to an increase in charter schools fees for facilities, security, IT costs from charter schools at CPS-owned buildings and administrative fees. This is estimated to be $49 million in FY 16, up from $46 million budgeted in FY 15, and discussed fully in Appendix B: School Funding Formulas.

State Revenue

Overview

CPS’s main source of state operating revenue, General State Aid (GSA) has been reduced each year since FY09 and, along with pensions, is a major driver of the structural deficit.

Since FY10, the state has failed to fully fund the state aid formula, which was designed to ensure school districts receive a minimum level of funding. When the state fails to appropriate enough dollars to fund to this level, it provides only of a percentage of the amount a district would otherwise receive, called “proration.” This GSA formula provides greater resources for those districts with either low property values, a high number or concentration of low-income students, or both. As a result, the proration of these payments disproportionately affects districts in need, including CPS. As a result of this underfunding and subsequent proration, we have lost well over half a billion dollars since FY 10, and will lose $83M dollars in FY 16 alone.

As Chart 1 shows, if the state had fully funded the GSA formula, CPS’s annual state funding would have been significantly higher.  That means our loss in state funding since 2010 has been primarily the result of the state failing to prioritize education funding.  

In addition charter schools that were approved by the State Charter Commission receive funding directly from the state which is deducted from what CPS would otherwise receive for state aid4.   Beyond those factors, underlying changes in the formula result from assumed changes in Chicago property values (the formula uses an assumption, not actual property values, which are declining) and counts of low-income students.

As discussed in the Pensions Chapter, CPS is the only school district in the state required to fund and maintain its own pension fund, so every dollar paid into the fund by CPS, or not paid by the state, is a dollar diverted from operating revenue. CPS will pay $676 million to CTPF in FY 16.  At the same time, the state will pay $3.7 billion to support the retirement of all teachers outside of Chicago.  In order to achieve pension equity, the FY16 budget relies on $480 million in additional pension support from the state in FY16.

As long as the state fails to prioritize funding for education, CPS will face financial challenges.

Chart 1: State Funding Has Declined Every Year Since 2009

GSA represents 16% of the total operating revenue. General State Aid consists of two components—the Equalization Formula Grant and the Supplemental Low-Income Grant (i.e. “Poverty Grant”).

The Equalization Formula Grant is based on the average daily attendance (ADA) at a school and generally on a local district’s ability to fund its own schools.  The goal is that state money supplements local resources such that the combination provides a foundation for all students, thereby equalizing funding at districts across the state. The statutory funding level target, or “foundation level,” is $6,119 in FY 16 and has been since FY 10.

The Poverty Grant is based on the number and concentration of low-income students at a school district. For its calculation of low-income students, the state uses a three year average, non-duplicated count of children eligible for Medicaid, the Supplemental Nutrition Assistance Program, the Children’s Health Insurance Program, or Temporary Assistance for Needy Families.

In addition, districts request adjustments to prior-year GSA allocations based on property values that were subsequently reduced after successful property tax appeals. CPS expects to receive $16.3 million for FY16 in prior-year adjustments.   

CPS’ General State Aid revenue is made up of 25% Formula Grant dollars and 75% Poverty Grant dollars. As mentioned previously in this chapter, when the state fails to appropriate enough dollars to fund to the foundation level, it prorates each district’s entire GSA payment (both Formula Grant and Poverty Grant), disproportionately affecting schools in need, such as CPS.

The projected $70.4 million decline in total General State Aid from the FY 15 budget ($56 million decline from the FY15 estimated revenue) is due primarily to steadily increasing assumed property value in the district, which drives down CPS’ Formula Grant Claim, and CPS’ declining low-income population, which drives down the district’s Poverty Grant claim. CPS also has two charter schools, approved by the State Charter School Commission, which receive GSA dollars from the district’s GSA revenue up-front. The year-over-year increase in the payments to these charter schools contributes to $2 million of the GSA decline.  

The allocation to schools of Supplemental General State Aid (poverty grant) will stay at $261 million, consistent with statute. Required GSA debt service diverts $42.9 million in FY 16 (down from $191 million in FY 15).

General Education and Educational Services Block Grants

CPS receives two block grants: General Education Block Grant and Educational Services Block Grant. The grant amounts are computed by multiplying the state appropriation for the programs included in the grant by the Board’s percentage share of those programs in FY 1995. The General Education Block Grant consists of grants for early childhood education, truants alternative optional education program (TAOEP), and agricultural education. The Educational Services Block Grant consists of grants for special education, state free and reduced meals, and pupil transportation.

In FY 16, CPS Block Grant revenue will increase by $21 million over FY 15 projected end of year revenue, for a total of $597 million. In addition, $2 million in carry-forward from the previous year is budgeted. $14 million of the $21 million increase returns CPS back to the funding levels it saw before the reductions in the spring when the state cut education funding to close a mid-year budget gap.  

Other State Revenues

Other state funding includes capital funds and categorical state grants that are not accounted for elsewhere.  For example, it includes grants for bilingual education, vocational education, and driver’s education.

CPS anticipates $23 million in bilingual education funding, which is relatively flat from FY 15 Budget. Funding is provided based on the number of students receiving five or more class periods of bilingual/English as a Second Language (ESL) instruction per week.  The amount of each district's grant is determined by the size of the student population, amount and intensity of bilingual/ESL services received by students, and the grade levels of eligible students. When the statewide total exceeds the appropriation, ISBE prorates reimbursements. In FY 16, our projections assume a proration level of 60%.

In FY 15 this revenue category included a grant for $33 million to offset some of the losses to CPS due to the mid-year funding reductions discussed above. In FY 16, that funding will be replaced by a different discretionary grant that will be used to offset the losses of those most affected by the state’s method of prorating General State Aid. We are projecting CPS to receive $3 million of these funds, for a net loss of $30 million between these two grants.

State Contribution for Capital

The FY 16 budget includes $96 million in state support for capital projects at CPS. The major sources of these capital dollars are as follows:

  • Gaming Revenue for School Construction:  Legislation was passed in 2013 that transfers funds from the State Gaming Fund to support school construction. CPS receives annual payments of $13.3 million to support construction of new schools, which is reflected in the FY 16 budget.
  • School Maintenance Grant: CPS expects to receive $16 million from the State's school maintenance grant program that was awarded in prior years but not received.
  • Chicago Vocational Career Academy Renovation: CPS expects to receive $60 million in FY16 as a reimbursement for the major renovation project at CVCA that was budgeted in FY12. This project was not included in the capital funding bill (PA 99-0007) and as such, drives some uncertainty to this portion of the forecast.
  • DCEO, Energy, and Other Grants: CPS projects to receive $7 million in grant funding from the Department of Commerce and Economic Opportunity and the Illinois Environmental Protection Agency for school-specific projects and projects to improve energy efficiency.

State School Construction Program

Over the past five years CPS has received support from the State School Construction Program.  In FY 15, CPS received $59 million.  However, in FY 16 no additional School Construction funds will be released by the state, reducing our revenue further.  Since these funds have been used to pay debt service on school construction projects, this loss of funding puts even more pressure on our declining GSA to cover debt payments.

Federal Revenues

Overview

Most federal grants require the Board to provide supplemental educational services for children from low-income or non-English speaking families or for neglected and delinquent children from preschool through 12th grade. These grants are dedicated to specific purposes and cannot supplant local programs. Medicaid reimbursement and Impact Aid are the only federal funding that is without any restriction.

Elementary and Secondary Education Act (ESEA) (also referred to as No Child Left Behind)

  • Title I-A – Low Income: Allocated based on a district’s poverty count, this is the largest grant received under the No Child Left Behind Act. The grant allows the district to provide supplemental programs to improve the academic achievement of low-performing students. CPS anticipates a reduction in the formula-based Title I amount to $252 million for FY16. The total grant available for FY16 is $321 million, which includes allowable carryover of $69 million due to the waiver CPS will receive.
  • Title I-A – School Improvement Grant 1003(a): This grant provides services for underperforming Title I schools to improve the overall academic achievement of their students. The State utilizes Title I funds to carry out its system of technical assistance and support for local educational agencies. Because of program changes by the state, the current award will increase to $4 million for FY16.
  • Title I-A – School Improvement Grants 1003(g): School Improvement Grants help ensure that all students have reading and math skills at grade level by 2015. Seven high schools will receive new awards in FY16. The total amount available for FY16 is $17 million under these grants, when including rollover amounts.
  • Title I-D – Neglected/Delinquent: This grant targets the improvement of educational services for neglected or delinquent children and youth in local and state institutions to assist them in attaining State academic achievement standards. Programs include academic tutoring, counseling and other curricular activities. The allocation for FY16 will be $2 million.
  • Title II-A – Improving Teacher Quality: Class size reduction, recruitment and training, mentoring and other support services to improve teacher quality are funded through this grant. The current year award is estimated to drop to $34 million in FY16. Including the estimated carryover of $10 million, the total award available for FY16 is $44 million.
  • Title III-A – Language Acquisition: Funding is provided to support students with limited English proficiency who meet eligibility requirements. The total funding available for the Language Acquisition grant is budgeted at $13 million for FY16, which comprises the estimated current-year allocation of $9 million and carryover of $4 million.
  • Title IV-B – 21st Century Community Learning Centers: These grants provide opportunities for communities to establish schools as community learning centers and provide activities after-school and evening hours.  For FY16, CPS estimates grant awards of $6 million, and rollover of $1 million.
  • Title VII-A – Indian Education: Funds from this grant are used to meet educational and culturally-related academic needs of American Indian and Alaska Native students.  Funds for FY16 are expected to increase to $236,000.
  • Title VIII – Impact Aid: This grant offsets lost revenue from federal acquisition of real property.  The Impact Aid is expected to stay flat year-over-year at $100,000 in FY16.

Individuals with Disabilities Education Act (IDEA)

IDEA grants provide supplemental funds for special education and related services to all children with disabilities from ages 3 through 21.  

The IDEA grants include a number of programs.

  • IDEA Part B Flow-Through: This is the largest IDEA grant, which is allocated based on a formula established by the state. The estimated award for the FY16 flow-through formula grant totals $91 million.  No carryover funding is available due to the FY15 allocation being fully spent.
  • IDEA Room & Board: This grant provides room and board reimbursement for students attending facilities outside of Chicago and is estimated at $2 million.
  • Part B Preschool: This grant offers both formula and competitive grants for special education programs for children ages 3-5 with disabilities. CPS is expected to receive $1 million from the formula grant and $489,650 from a competitive grant for FY16.

Including small competitive grants and carryover from the previous year in the preschool grant, total IDEA funding equals $94 million in FY16.  

National School Lunch Program & Child and Adult Care Food Program

CPS offers breakfast, lunch, after school supper, after school snacks, Head Start snacks for afternoon classes during the school year, and serves breakfast and lunch during summer school.

Starting in 2012 CPS opted to participate in the Community Eligibility Provision program.  All schools now are part of this program, which provides all students a free lunch regardless of income eligibility. CPS is reimbursed for all lunch meals at the maximum free reimbursement rate under the National School Lunch Program.

CPS’s school breakfast programs provides breakfast in the classroom free of charge to all students regardless of income. 

In addition, the USDA reimburses for free after school meals and free Head Start snacks under the Child and Adult Care Food Program and provides donated commodities based on the number of prior year lunches served.

 Federal reimbursements are projected to increase from $200 million in FY15 to $213 million in FY16 with an increased reimbursement rate, and a higher contribution of donated food. These revenues include: 

  • $139 million from school lunches
  •  $53 million from breakfast programs
  • $13 million of donated food from the U.S. Department of Agriculture 
  • $8 million of after school meals and Head Start Snacks

Medicaid Reimbursement

CPS provides a variety of services to students with disabilities such as speech therapy, physical therapy, occupational therapy, mental health service and special transportation. CPS qualifies for Medicaid reimbursement for these covered services to eligible students and the costs of administrative outreach activities.  

Medicaid pays for costs of direct, medically necessary services provided to eligible children who have disabilities in accordance with the Individuals with Disabilities Education Act (IDEA). In Illinois, services that may be claimed for School-Based Health Services' Medicaid reimbursement are: Audiology, Developmental assessments, Medical equipment, Medical services, Medical supplies, Nursing services, Occupational therapy, Physical therapy, Psychological services, School health aide, Social work, Speech/language pathology, and Transportation.

These services are frequently specified as necessary related services in individual education programs (IEP) developed by schools for children with disabilities. When these services are provided under a child's IEP, the services are eligible for federal Medicaid reimbursement, at the state’s reimbursement rate, approximately half of the established cost to provide the service. 

Schools may also claim some costs for the administration of the program.  Allowable administrative claims include outreach activities designed to ensure that the entire student community has access to Medicaid covered programs and services, as well as costs incurred for implementing and monitoring the Illinois state Medicaid plan.

Medicaid revenues in FY 16 are expected to remain flat to FY 15 at $48 million. A decline in rates and the more efficient operation on busing in FY 16 is expected to be outweighed by CPS initiatives to claim some services not currently being claimed, and to create a better pipeline for Medicaid enrollment.

Other Federal Grants

Other Federal Grants include competitive grants for other specific purposes. Below is a brief description of major grants under this category:


  • Start: The United States Department of Health and Human Services provides funds for the Head Start program, which focuses on educating children from birth to five years old who are in low-income families. The program provides comprehensive education, health, nutrition and parent involvement services to these children. CPS Head Start programs are funded through the City of Chicago.  The FY16 award for Head Start is expected to increase to $41 million from $38 million in FY15.
  • Carl D. Perkins: This grant was established to develop academic and technical skills for career opportunities, specific job training and occupational retraining.  This grant targets students in secondary and post-secondary education.  The FY16 Perkins formula grant is anticipated to decline to $6 million as a result of decreased poverty rates. This includes an estimated rollover of $181,000.
  • Race to the Top: The FY16 allocation of $2 million will allow CPS to integrate and analyze data collection; create science, technology, engineering and math programs; and train teachers on the CPS framework for teaching.

Federal Interest Subsidy under Qualified School Construction Bonds (QSCBs) and Build America Bonds (BABs)

In FY16 CPS has budgeted to receive a direct federal subsidy payment of $25 million for these two types of federally-subsidized bonds. This amount takes into consideration an allowance assumption of 7.5% for federal sequestration and has not changed from our FY15 assumptions. See the Debt Management chapter for more information.


1 New property is in addition to the amount capped at inflation.

2 http://www.revenue.state.il.us/LocalGovernment/PropertyTax/CPIhistory.pdf

3 IHS Economics

4 The charter average daily attendance is added to CPS attendance and included in the GSA formula.

Page Last Modified on Tuesday, July 26, 2016