Chicago Public Schools Fiscal Year 2017 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 FY17 Budget Book.

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CPS received the GFOA Distinguished Budget Presentation Award for our FY2016 online budget site.


Organization Chart

Revenue

In FY17, Chicago taxpayers and State of Illinois are taking major steps forward to provide Chicago Public Schools with additional revenue – but a long-term solution is still needed to address the District’s revenue challenges.

CPS will be receiving additional revenue streams this year from several sources:

  • A reinstated property tax levy on Chicagoans that will generate approximately $250 million annually directly for teachers’ pensions;
  • A $215 million State contribution toward the annual cost of Chicago teachers’ pensions, a step toward recognition that Illinois’ teacher pensions must be treated equally;
  • A landmark equity grant from the State of Illinois, recognizing that schools districts that educate students in poverty face additional challenges and providing $102 million in funding;
  • Additional State funding for early childhood education that will provide $29 million in funding.

However, revenue generation remains a primary financial challenge for CPS because the District has little control over its revenue sources. State funding is set by formula, and had been declining year over year until Springfield took action for additional P-12 education funding in FY17. 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 for children. Other than American Recovery and Reinvestment Act stimulus funds in FY09-11, federal revenues have been relatively flat. Property taxes are the main source of local revenue (and the District’s largest single source of revenue overall) and for the most part, are capped at the rate of inflation1. While this year’s reinstatement of the property tax levy for teacher pensions will provide a sizeable increase in the District’s property tax revenue in FY17, property taxes are otherwise capped by inflation or 5 percent, whichever is lower.

 

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

  FY16 Budget FY16 End Of Year FY17 Budget FY17 vs. FY16 Budget
Local Revenues
Property Tax 2,359.9 2,359.8 2,659.8 300.0
Replacement Tax 207.8 185.1 188.8 (19.0)
Other Local 423.3 437.0 343.1 (80.2)
Total Local 2,990.9 2,981.9 3,191.7 200.8
 
State Revenues
GSA 952.2 952.5 1,059.9 107.6
Capital 96.3 33.2 14.8 (81.5)
Other State 668.0 666.0 916.2 248.2
Total State 1,716.5 1,651.7 1,990.9 274.4
 
Federal 889.9 868.0 860.7 (29.2)
Unrealized Revenue 480.0 - - (480.0)
Investment Income 0.2 0.2 0.0 (0.2)
 
Total Revenue 6,077.5 5,564.9 6,043.3 (34.2)
Reserves 75.1 80.8
Bonds & Other 849.5 335.7

Table 2 illustrates how revenues are used, including for debt service and capital. It also shows the remainder of revenues available for day-to-day operations. While FY17 total revenues are approximately $6.0 billion, only $5.4 billion are available for operations. The amount needed for debt service in FY17 is significantly higher than FY16 because of bond restructuring in FY16 (also known as “scoop and toss”), which temporarily suppressed costs associated with debt service requirements in that year. CPS will not be using scoop-and-toss in FY17. However, this means that the General State Aid (GSA) that was freed up for use on operating expenses in FY 16 as a result of this restructuring, will again be used for debt service costs in FY17.

 

Table 2: FY17 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 2,659.8 52.0 0.0 2,607.8
Replacement Tax 188.8 58.3 0.0 130.5
Other Local 343.1 95.5 39.4 208.1
Total Local 3,191.7 205.8 39.4 2,946.5
 
State Revenues
GSA 1,059.9 373.4 0.0 686.4
Capital 14.8 0.0 14.8 0.0
Other State 916.2 0.0 0.0 916.2
Total State 1,990.9 373.4 14.8 1602.7
 
Federal 860.7 24.8 6.0 829.8
 
Investment Income 0.0 0.0 0.0
 
Total Revenue 6,043.3 604.0 60.2 5,379.0

Revenue Projections

This section summarizes the District’s major revenue sources and our projected FY17 revenue from each. Additional details about each revenue sources is provided in the Interactive Budget on the CPS budget website: www.cps.edu/budget.

FY17 operating revenues are budgeted at $5.4 billion, a decrease of $223.6 million from our FY16 budget and $279.0 million more than our estimated end of year FY16 operating revenues. The decrease in revenue is the result of CPS budgeting $480 million in unrealized pension support in FY16. While that revenue was not realized in FY16, increases in state and local revenue are enough to offset the loss in the FY 17 budget.

Table 3: FY17 Operating Revenues

$ in millions FY16 Budget FY16 Estimated End of Year FY16 Change FY17 Budget FY17 Change to Budget
Property Tax 2,307.8 2,307.8 0.0 2,607.8 300.0
Replacement Tax 149.5 126.8 (22.7) 130.5 (19.0)
TIF Surplus 87.2 103.5 16.3 32.5 (54.7)
All Other Local 158.0 155.4 (2.6) 175.6 17.6
Total Local 2,702.5 2,693.5 (9.0) 2,946.5 243.9
State 1,565.2 1,563.5 (1.7) 1,375.3 (189.9)
State Pension Support 492.1 12.1 (480.0) 227.4 (264.7)
Federal 852.6 830.7 (21.9) 829.8 (22.8)
Investment Income 0.1 0.2 0.1 0.0 (0.1)
Total Revenue 5,612.6 5,100.0 (512.6) 5,379.0 (233.6)

 

Local Revenues

Property Taxes

Our FY17 projection for property tax revenue is $2,660 million, of which $52 million is dedicated for debt service, resulting in a total of $2,608 million available for operating purposes. This is an increase in operating revenue of $300 million over FY16 Budget. The biggest driver of this increase is due to the reinstatement of the District’s dedicated pension levy, which will produce approximately $250 million in new revenue to help pay for Chicago teacher pensions. While CPS’ property taxes are capped by state law, at the request of Mayor Rahm Emanuel, the state reauthorized the board to levy this special tax annually, starting in FY17. Proceeds of this reinstated levy will be directed to the Chicago Teacher Pension Fund (CTPF) and will free up $250 million in operating revenue to be used in the classroom. The additional $50 million year-over-year increase is driven by $17 million from taxing at the cap, or the rate of inflation, and $33 million from the extension on new property and variability in the collection rate.

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 percent 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 2017 property tax extensions (levied in 2016) is 0.7 percent, which is the second lowest level in recent history2. As a result, our increase in extensions on existing property for FY17 will be very low, as it has been for the past several years. This low growth in property tax revenues has placed even greater pressure on our other major revenue sources, which make up less than half of total revenue. The reinstated pension levy helps to alleviate this pressure.

Like other government bodies, CPS has a 60-day revenue recognition period. This generally allows us to recognize revenues received prior to August 29, 2017 as FY17 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 decrease from $208 million in FY16 to $189 million in FY17. This includes $58 million set aside for debt service and leaves $131 million for operating purposes. PPRT money being diverted to pay debt service is another example of CPS’ 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.

The reduction of $19 million from FY16 to FY17 is driven largely by a downward adjustment made to the State’s calculation of the PPRT distribution rate. The state informed CPS that the recent years’ PPRT distributions statewide were artificially high due to an error in the state’s calculation of Corporate Income Tax payments. The estimated PPRT revenue of $208 million in CPS’s FY 16 budget was artificially high as a result.

TIF Surplus and Other Local Revenues

CPS has received more than $1 billion in TIF funds for capital investments in schools throughout the city over the past decade. On top of capital expenditures, Mayor Emanuel is also committed to declaring a surplus of TIF funds each year.  In July 2015, the Mayor announced a freeze on new spending in downtown TIF districts, which created an estimated $250 million in additional TIF surplus over five years. In FY16, CPS received a spike in TIF funding because the surplus was greater than expected and some FY15 payments were received in FY16. In FY17, the TIF surplus funds for CPS are returning to the more normal level of $32.5 million.

“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 $57 million versus $55 million in FY16. It is recorded as revenue as required by the Governmental Accounting Standards Board (GASB).

State Revenue

Overview – State Funding Developments
CPS’s main source of state operating revenue, General State Aid (GSA), had been reduced each year since FY09 and had been a major driver of the structural deficit. With the action taken by Springfield in FY17, CPS will see its first increase in state funding since FY09, due to GSA being held harmless, a $29 million increase in early childhood funding, and the inclusion of a landmark new equity grant which provides CPS with an additional $102 million.

The State has established a minimum level of funding called the “foundation level,” and it is designed to ensure that school districts receive a minimum level of funding. However, from FY10 to FY16, the State “prorated” GSA – meaning it provided only a percentage of the minimum level of funding. When the state failed to appropriate enough dollars to fund to this level, it provided 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 would disproportionately affect districts in need, including CPS. As a result of this underfunding and subsequent proration, CPS had lost well over half a billion dollars. In response, in FY17 the state is not prorating GSA and will hold districts’ GSA harmless from enrollment declines.

In addition, the State has for years held the dubious distinction of being the worst state in the country for funding the education of children in poverty. Education experts and national independent advocacy groups have long pointed to Illinois as a state that needs to reform how it funds the education of children in poverty to make it more equitable. This year, the State has recognized the urgent need to reform poverty-related funding, and has created an “Equity Grant” of $250 million. Many districts throughout the State benefit from the equity grant, and CPS receives $102 million of the funds.

In addition to the lost revenue CPS has experienced via GSA proration, 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 aid. In FY17 the state approved three new charter schools, which is anticipated to divert another $14 million in GSA from the district, in addition to the $12 million already being diverted by the existing two state-approved charter schools at CPS. The District has made clear that legislation is needed to reform the Charter Commission, and is disputing the Charter Commission’s actions in court.

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 is a dollar diverted from operating revenue. CPS will pay $506 million to CTPF in FY17, due in part to a pledged $215 million payment by the State.  At the same time though, the State is projected to pay $4.0 billion to support the retirement of all teachers outside of Chicago.

 

Chart 1: FY 2017 First Year of State Funding Increase for CPS Since FY 2009

Chart 1:FY 2017 First Year of State Funding Increase for CPS Since FY 2009

 

Funding Source Details
The State has many different mechanisms for funding education in Illinois, including General State Aid, pension contributions, grants, block grants and other sources. In FY17, all sources of State education funding are estimated to be $11.5 billion. CPS will be receiving a total of $2.0 billion in State funds.

GSA represents 13 percent of the District’s total operating revenue. General State Aid consists statutorily of two components—the Equalization Formula Grant and the Supplemental Low-Income Grant (i.e. “Poverty Grant”). As mentioned above, in FY17, the state appropriated a landmark new grant to districts throughout the state to account for the greater need for funding for children in poverty, referred to as the “Equity 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,” was $6,119 in FY16 and has been since FY10.

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 3-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.

For the first time, in FY17 the state appropriated an “Equity Grant” which is supplemental to the GSA Poverty Grant and allocates dollars to districts based on the percentage of statewide Poverty Grant they received in FY16. This provides additional resources to those districts with higher concentrations of low-income students, such as CPS, and is a step forward to address the statewide need to reform the State’s highly regressive education funding formula.

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. 

Under the GSA formula, over one-third of districts were slated to lose GSA revenue in FY17. With an already highly regressive funding system and after seven years of prorating General State Aid, the state decided in FY17 to provide an Equity Grant and hold districts’ GSA allocation harmless to FY16. Specifically, a district will receive their FY16 GSA allocation, plus the amount of the new equity grant, or their calculated FY17 GSA amount, whichever is greater. This means CPS will receive the same GSA in FY17 that the District received in FY16, and an additional amount via the Equity Grant.

Total General State Aid for CPS is projected to increase from the FY16 budget to the FY17 budget by $107.6 million. This is due primarily to the inclusion of hold-harmless and $102.4 million in the new Equity Grant, with $14.2 million more being diverted to state-approved charter schools which receive GSA dollars from the district’s GSA revenue up-front (total of $26.2 million in FY17). The amount budgeted for debt service from GSA will increase dramatically from $42.9 million in FY16 to $373.4 million in FY17, as a result of the expiration of one-time savings due to debt restructuring measures in FY16. The pressure of this increase in debt service will decrease the amount budgeted and available from GSA for operations by $222.9 million; from $909.3 million in FY16 to $686.4 million in FY17.

General Education and Educational Services Block Grants
CPS receives two block grants: the 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 FY95. 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 FY17, CPS Block Grant revenue will increase by $36 million over FY16 budget, for a total of $634 million. This increase is the result of a statewide investment in early childhood education, resulting in an additional $29 million for CPS, the appropriation for Regional Offices of Education (school services) that was absent from the state’s FY16 budget, and grant expenditures falling outside the district’s revenue recognition period.

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 $21 million in bilingual education funding, which is relatively flat from FY 16 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 17, our projections assume a proration level of 60 percent.

As noted in the Pension chapter, CPS anticipates a $215.2 million State contribution to the Chicago Teacher’s Pension Fund that is included in “other state revenues.” $3.0 million was budgeted in FY16 for mitigation of losses due to the proration of GSA and is now budgeted as GSA in FY17, due to the hold harmless provision of GSA in FY17. All other state revenues are relatively flat to FY 16.

State Contribution for Capital
The FY17 budget includes $14.8 million in state support for capital projects at CPS, which is a reduction from the FY16 budget of $83.1 million. Legislation was passed in 2013 that transfers funds from the State Gaming Fund to support school construction. Per this statute, CPS receives annual payments of $13.3 million to support construction of new schools, which is reflected in the FY17 budget. Additionally, CPS expects to receive $1.5 million in grants from the Illinois Environmental Protection Agency for green infrastructure projects. All other capital revenue budgeted in FY16 is not anticipated in FY17.

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-income students. CPS anticipates a reduction in the formula-based Title I amount to $250 million for FY17. The total grant available for FY17 is $293 million, which includes allowable carryover of $43 million from the previous year.
  •  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 stay level at $4 million for FY17.
  • Title I-A – School Improvement Grants 1003(g): School Improvement Grants help ensure that all students have reading and math skills at grade level. The total amount available for FY17 is $15 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 FY17 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 stay level at $34 million in FY17. Including the estimated carryover of $12 million, the total award available for FY17 is $46 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 FY17, which comprises the estimated current-year allocation of $11 million and carryover of $2 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 FY17, CPS estimates grant awards of $5 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 FY17 are expected to increase to $239,000.
  • 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 FY17.

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 FY17 flow-through formula grant totals $94 million.  No carryover funding is available due to the FY16 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 $489,250 from a competitive grant for FY17.

Including small competitive grants and carryover from the previous year in the preschool grant, total IDEA funding equals $98 million in FY17.

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 provide 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 decrease from $213 million in FY16 to $209 million in FY17 due to a decrease in enrollment. These revenues include:

  • $135 million from school lunches
  • $50 million from breakfast programs
  • $16 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 FY17 are expected to be $58 million. In an effort combat lost revenue from declining state reimbursement rates, CPS is pursuing initiatives to increase Medicaid enrollment, increase accuracy in the recording of services provided at schools, reduce the number of denied claims, and begin submitting claims for services not currently being billed.

Other Federal Grants

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

  • Head 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 5 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 FY17 award for Head Start is expected to increase to $42 million from $41 million in FY16.
  • 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 postsecondary education. The FY17 Perkins formula grant is anticipated to stay level at $6 million with an estimated rollover of $900,000.

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

In FY17 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 FY16 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

Page Last Modified on Monday, August 22, 2016