Chicago Public Schools Fiscal Year 2014 Budget

Revenue

Budget Overview

 

Revenue Overview

CPS receives revenue from local, state, and federal sources as outlined in the table below. Each of the different sources is described in the sections that follow, along with the assumptions used in our budget projections and a justification for our estimates.

All Funds by Revenue Source (in Millions)

 

 

FY2012 Actual

FY2013 Budget

FY2013 Estimated End of Year

FY2014 Budget

FY2014 vs. FY2013 Estimated

Local Revenues

 

Property Tax

2,352.1

2,106.0

2,106.0

2,193.4

87.4

 

Replacement Tax

181.9

163.4

186.0

162.5

(23.5)

 

Other Local

324.5

266.5

266.5

449.6

183.1

 

Total Local

2,858.5

2,535.9

2,558.5

2,805.5

247.0

 

 

 

 

 

 

 

State Revenues

 

GSA

1,136.5

1,076.0

1,076.0

1,085.6

9.6

 

Capital

0.0

115.0

60.0

101.7

41.7

 

Other State

829.4

660.4

710.4

655.9

(54.5)

 

Total State

1,965.9

1,851.4

1,846.4

1,843.2

(3.2)

 

Federal

936.0

937.7

918.6

932.9

14.3

 

Investment Income

4.5

3.5

3.1

(0.4)

 

Total Revenue

5,760.4

5,329.5

5,327.0

5,584.7

257.7

Bonds & Other

403.6

500.0

 464.0

 300.0

As discussed more fully in the Budget Overview chapter, some of the revenues CPS receives are dedicated to debt service and others for capital. What remains is available for the day-to-day operations of CPS. While FY14 total revenues are approximately $5.6 billion, only $4.9 billion is available for operations.

FY2014 Revenue Sources Allocated for Debt, Capital and Operating Funds

 

 

Total

Amount for Debt Service

Amount for Capital

Balance for Operating Budget

Local Revenues

 

 

Property Tax

2,193.4

52.0

2,141.4

 

Replacement Tax

162.5

57.0

105.5

 

Other Local

449.6

97.1

182.9

169.6

 

Total Local

2,805.5

206.1

182.9

2,416.5

 

 

State Revenues

 

GSA

1,085.6

120.1

965.5

 

Capital

101.7

75.8

25.9

0.0

 

Other State

655.9

655.9

 

Total State

1,843.2

195.9

25.9

1,621.4

 

Federal

932.9

24.5

 

908.4

 

Investment Income

3.1

 

 

3.1

 

Total Revenue

5,584.7

426.5

208.8

4,949.4

 

Analysis of Operating Revenues

The revenue picture for CPS continues to be challenging.  We have little control over the amount of revenue we receive, with most federal and state money determined by formulas which are driven by factors mainly out of our control.   The only local revenue we do control is property taxes and the amount of property taxes each year is governed by a statutory cap. 

FY2014 operating revenues are budgeted at $4.9 billion, an increase of $93.7 million from our estimated FY2013 year-end.  The major driver of the overall increase in these revenues is property taxes:  CPS is proposing to bring property taxes to the cap.   With flat or declining state and federal revenues, no reforms to the pension system, and growing costs due to contractual salary increases and health care among others, CPS has no alternative but to turn to local sources to help address our structural deficit.  

State Revenues.  State revenues remain challenging for the district.  In FY2013 the state finally caught up with past due Block Grant payments, paying the remaining $50 million in early July.  Because of the catch-up in FY2013, FY2014 revenue will be lower than FY2013, but the budget does assume that the state remains current and we receive the full amount due in FY2014.  Another major source of state operating revenue, General State Aid, is up slightly compared to last year.  However, the increase is not enough to offset the years of decline and state revenue is still below FY2008 levels.  

Federal Revenues.  Looking at the aggregate federal revenue picture can be misleading.  While total federal revenues are projected to increase from FY2013 Estimated End of Year, this is the result of using one-time carryover funds in FY2014. For example, CPS’ allocation of Title I, its major federal revenue source, is declining.  The federal award in FY2012 was $296 million, decreased to $287 million in FY2013, and will be $269 million in FY2014. 

However, in the case of Title I, most of this money is allocated to schools as discretionary funding and often schools do not spend the full amount allocated to them.  Therefore, CPS has historically carried over federal funding from one year to the next. In FY2014, $39.5 million of these carryover funds will be used, making the Title I revenue estimate $325 million. Thus, the use of carryover funds masks an actual decline in the amount of federal revenue CPS is receiving. These carryover amounts are detailed in the specific revenue discussions below.    

In total, given all the changes in the budget, had CPS not raised property taxes to the cap our overall revenues would have been nearly flat again. 

FY2013 Operating Revenues Up Compared to FY2013 Due to Property Taxes

 

FY 13 Amended Budget

FY 13 Estimated

FY 13 Change

FY 14 Budget

FY 14 Change

  Property Tax

  2,052.8

2,052.8

                -  

            2,141.4

88.6

  Replacement Tax

     105.7

128.3

           22.6

               105.5

(22.8)

  All Other Local

    134.4

134.4

                -  

               169.7

35.3

Total Local

  2,292.9

2,315.5

           22.6

            2,416.6

101.1

State

       1,593.2

     1,645.2

           52.0

            1,621.5

(23.7)

Federal

          910.8

         891.7

        (19.1)

               908.4

16.7

Investment Income

               3.5

              3.5

               -  

                   3.1

(0.4)

Total Revenue

       4,800.4

    4,855.9

   55.5

            4,949.6

93.7

 

LOCAL REVENUES

Property Taxes

The FY2014 budget recommends that the Board extend property taxes up to the 3% tax cap and capture all growth from new property.  This will generate an additional $88 million in FY2014 (Fiscal-year collections are different from calendar-year property tax extensions because tax extensions are the total amount of property tax bills sent to taxpayers each calendar year.), a significant contributor to closing the budget deficit this year and helping to address the long-term structural deficit.   Property taxes support the General Fund, Tort Fund and Debt Service Funds. 

Property tax revenues in the budget are equal to the estimated property tax cash collections from August through the end of July in each fiscal year (the one-month lag or difference to our fiscal year-end of June 30th is due to our revenue recognition policy of allowing cash receipts received in July to be included in revenue).  

This policy leads to significant volatility in our revenues since Cook County changed the date for the second installment of property taxes to August 1 in 2012.  In 2012, it meant that $244 million of property tax revenues that had been budgeted in FY2013 were received during the FY2012 revenue recognition period.   Significantly, $185 million was received on July 31, 2012, just one day past our revenue recognition period.  Had those receipts come in just one day earlier, our FY2012 surplus would have been even greater.  Similarly, $113 million came in on July 27.  Had those come five days later, they would not have been recorded in FY2012.  This volatility poses significant challenges for projecting property tax receipts for FY2013 and budgeting for FY2014.  We projected that we will have a similar pattern of collections as 2012, yet with only one year of experience with the property tax due date we cannot be certain what revenues will be.   To be clear, the timing of tax receipts does not impact the total amount we receive from the County for the 2nd installment, rather it solely impacts which year we are required to recognize the revenue.

Personal Property Replacement Taxes (PPRT)

PPRT is expected to decline from $186.0 million in FY2013 to $162.5 million in FY2014.  FY2013 saw higher than expected PPRT collections because expiration of tax cuts at the federal level accelerated corporate tax payments.  Since Illinois’ income taxes are linked to federal income, this had the effect of increasing state corporate income tax collections and the associated PPRT payments.    This increase is not expected to recur, and therefore FY2014 PPRT payments are budgeted to return to a more typical level of $162.5 million (Fiscal-year collections are different from calendar-year property tax extensions because tax extensions are the total amount of property tax bills sent to taxpayers each calendar year).

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 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. 

Other Local Revenues

Other local revenues are budgeted at $449.6 million for FY2014, an increase of $183.1 million from the FY2013 year-end estimate.  The increase is entirely attributable to anticipated reimbursement for capital projects from the City of Chicago. 

“Other local revenues” includes the pension payment made by the City of Chicago on behalf of CPS employees in the Municipal Employees pension fund (discussed in the Pension chapter) and estimated at $54.6 million. It is recorded as revenue as required by the Governmental Accounting Standards Board (GASB).   The balance includes $280 million in reimbursements for capital and debt-service, including various intergovernmental agreements with the city.

In addition, “other local revenues” include $20.1 million for TIF surplus, $10 million for school internal account funds, $26 million in pension payments for charter schools, and facilities fees and security costs from charter schools at CPS-owned buildings.   Detail of each of the revenue sources is provided in the Interactive Budget on the CPS budget website: www.cps.edu/budget

STATE REVENUES

General State Aid (GSA)

GSA represents the major type of state support that all public school districts receive. GSA consists of regular GSA and a poverty grant. Regular GSA utilizes many factors in its allocation formula, such as average daily attendance, a specified annual foundation level, available local resources, and tax rates.  The poverty grant is allocated based on the concentration of low-income students that utilize Medicaid, food stamps and Temporary Assistance for Needy Families (TANF). 

Although the per pupil “foundation level” is set at $6,119 for FY2014, the same as in the past three years, the statewide appropriation is insufficient to pay for the foundation level. Therefore, all school districts will receive 89.1 percent of their GSA.  The General Assembly appropriated funding sufficient to maintain this proportion and therefore GSA for CPS is expected to be up slightly (based on the formula).

In addition, CPS requests adjustments on prior-year GSA allocations based on property values that were subsequently reduced after the taxpayer filed a successful property tax appeal. CPS expects to receive $16.3 million for FY2014.   

The allocation to schools of Supplemental General State Aid (poverty grant) will stay at $261 million, consistent with statute. Debt service requires $120.1 million and the balance of $965.5 million will go to the General Fund.   

General Education and Educational Services Block Grants

CPS receives two block grants: General Education Block Grant (GEBG) and Educational Services Block Grant (ESBG). 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 FY1995. Although the formula didn’t change, the GEBG became categorical in FY2012 and the Bilingual Education grant became a separate categorical grant in FY2011.    In FY2014, as in FY2013, we are showing the block grant funding in its component parts: Early Childhood Education and Truants Alternative Optional Education. 

Because of fiscal constraints, the State has delayed payment of two block grants and other miscellaneous grants since FY2009. GASB 33 and the Board revenue-recognition rule require CPS to record receivables as revenues as long as they come in within 30 days after a fiscal year ends. The table below shows the history of the state delays.  In Fiscal Year 2013, the state caught up on its payments.  This made the end of year FY2013 results better than anticipated by $50 million.

Year Ending

July 30, 2009

July 30, 2010

July 30, 2011

July 30, 2012

July 30,2013 (estimated)

Balance Owed ($ in millions)

$164.8

$227.9

$167.1

$111.7

$1.97

The budget assumes that the state will remain current throughout FY2014.

Other State Revenues

Other state funding includes capital funds and small categorical state grants that are not accounted for anywhere else.  It includes the state contribution for teacher pensions, $11.9 million.  It also includes vocational education, bilingual education, driver’s education, and other state grants.  Details of each are available on the budget website.

State Contribution for Capital

In FY2010 the state adopted a major new capital program, including funding for P-12 capital programs.  CPS expects to receive $446 million over six years. The FY2014 budget includes $54.1 million from the State School Construction program.  This is the final payment anticipated. 

  • School Construction Program: CPS receives 20 percent of the statewide $1.5 billion total ($300 million) over six years. The Capital Development Board (CDB) administers capital improvement programs for local school districts. CPS received $60.9 million from this program in FY2012 and $60 million in FY2013.  The final $54.1 million is anticipated in FY 2014 and will be used to offset debt service costs.
  • Early Childhood Construction Program: The full $9 million state allocation to CPS was appropriated in the FY2012 Capital Budget.  However, CPS expects to receive the remaining $5 million payment from the state in FY2014.
  • DCEO Energy Grants.  CPS expects to receive $5.0 million from the state Department of Commerce and Economic Opportunity for capital grants to improve energy efficiency.
  • Capital Grants for Specific CPS Schools:  The state’s FY2014 capital plan included an additional $2.9 million in grants for capital projects at specific CPS schools.  The CPS FY2014 budget anticipates receiving these funds.
  • Gaming Revenue for School Construction.  New legislation was passed in 2013 (PA 98-0018) that transfers funds from the State Gaming Fund to support school construction.  CPS will receive a one-time payment of $18.4 million and an annual payment of $13.3 million to support construction of new schools.  This is discussed more fully in the Capital and Debt Management Chapters.

FEDERAL REVENUES

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)

Total ESEA grants available for the current budget are projected to slightly increase from $435.6 million in FY2012 to $438.3 million in FY2013. The increase results primarily from the School Improvement Grants, which will see a growth of $12.8 million over the FY2012 budgeted level.

  •      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 $269 million for FY2014 due to federal sequestration. The total grant available for FY2014 is $325 million, which includes carryover of $39.5 million from prior years.
  •      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 decrease to $4.5 million for FY2014.
  •      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 2014. Thirteen high schools will receive new awards between $1.3 and $2 million in FY2014. The total amount available for FY2014 is $34.5 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 FY2014 will be $1.66 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 $34.4 million in FY2014. Including the estimated carryover of $22.5 million, the total award available for FY2014 is $56.9 million.
  •      Title III-A: Language Acquisition: Support is provided to students with limited English proficiency who meet eligibility requirements. The total funding available for the Language Acquisition grant is budgeted at $11.9 million for FY2014, which comprises the estimated current-year allocation of $8.6 million and carryover of $3.3 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 FY2014, CPS estimates grant awards of $8.7 million, and rollover of $1.58 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 FY2014 are expected to increase to $195,740.
  •       Title VIII: Impact Aid: This grant offsets lost revenue from federal acquisition of real property.  The Impact Aid is expected to stay flat at $100,000 in FY2014, based on the declining number of students from public housing in Chicago.

 

Individuals with Disabilities Education Act (IDEA)

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

The IDEA grants include a number of programs. Part B flow-through is the largest IDEA grant, which is allocated based on a formula established by the State. The estimated award for the flow-through formula grant totals $101.9 million, which consists of $87.3 million of current-year funding and $14.6 million of carryover funds. Room and board reimbursement for students attending special facilities outside of Chicago is estimated at $1 million. The Part B Preschool grant offers both formula and competitive grants for special education programs for children ages 3-5 with disabilities. These preschool programs are expected to have $1.6 million from the formula grant ($1.2 million of FY2014 allocation plus $400,000 of carryover/rollover) and $500,000 from a competitive grant for FY2014. Including small competitive grants and carryovers from the previous year, total IDEA funding equals $105.1 million for FY2014. 

Meal Reimbursement for National School Lunch Programs

CPS offers breakfasts, lunches and dinners for children during the school year and serves lunches in summer. The federal government provides reimbursement for free, reduced-price and paid lunches and breakfasts under the National School Lunch Program. In addition, the federal government reimburses costs for the dinner program under the Child Care and Adult Food Program and provides free surplus commodities based on the number of meals served. CPS’ universal school breakfast programs provide breakfast in the classroom when school starts in the morning rather than in the cafeteria before school starts, easing participation for children. 

Federal reimbursements are projected to increase from $194.7 million in FY2013 to $201.1 million in FY2014 with an increased reimbursement rate, higher contribution of donated food, and increased participation rate in the snacks and after-school program. These revenues include:

  •    $129.5 million from school lunches
  •    $48.3 million from breakfast programs
  •    $14.0 million of donated food from the U.S. Department of Agriculture 
  •    $9.3 million from snacks after-school dinner programs

Medicaid Reimbursement

CPS provides a variety of medical 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 medical services and the costs of administrative outreach activities provided to eligible students. 

Effective FY2009, the Illinois Department of Healthcare and Family Services started applying cost-based rates to Medicaid reimbursement. As these new rates are retroactive to FY2004, CPS saw temporary increases in Medicaid reimbursement through FY2012. The FY2012 revenues of $83.7 million reflect receipts of retroactive rate adjustments to previous claims. Medicaid revenues are expected to decline to the normal level of $52.3 million in FY2014.       

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 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 FY2014 award for Head Start is expected to drop to $39.9 million. 
  • 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 Perkins formula grant is anticipated to decline to $5.7 million as a result of decreased poverty rates. With the estimated $1 million carryover, the total grant will provide $6.7 million for the program.
  • Race-to-the Top:  The FY2014 allocation of $8 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.
  • Smaller Learning Community Grants: The grants are used to implement smaller high schools to improve academic achievement, graduation rates and the learning climate and culture.  Congress eliminated this grant; the total award remaining for the last year of the grant is $2.6 million.
  • E-Rate Subsidy.  $14 million is included from this program, which provides discounts to assist schools and libraries to obtain affordable telecommunications and Internet access.  

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

CPS will receive a direct subsidy payment of $24.5 million in FY2014 from the federal government for these two types of federally-subsidized bonds.  This is $2.3 million less than was anticipated as a result of federal sequestration.  These bonds are discussed more fully in the Debt Management chapter.

Page Last Modified on Thursday, August 28, 2014