Revenue

Chicago Public Schools’ finances, like those of districts across the country, have been impacted by the COVID-19 pandemic. The FY2024 revenue budget reflects the unanticipated and historic changes to revenue sources that are the result of the pandemic and recent market fluctuation and inflation. As a unit of local government, CPS’ sources of revenue are categorized by the level of government (local, state, and federal) that collects, distributes, or grants resources to the District––all of which have been impacted by the pandemic.

The largest share of local revenue comes from the Chicago Board of Education’s ability to tax residents on the value of their property. The stability of this revenue source is vital to the financial health and viability of the District. CPS’ ability to extend taxes is governed by the Property Tax Extension Limitation Law (PTELL) that limits the amount CPS can increase its property tax levy by the lesser of the change in the Consumer Price Index (CPI) or five percent. For FY2024 the relevant CPI has been calculated at 6.5 percent, reflecting the impact of inflation seen nationwide. This means that CPS’ increase to the property tax levy will be capped at five percent.

The largest portion of state funding allocated to CPS and other Illinois districts is Evidence-Based Funding, or EBF. The state’s EBF model allocates each year’s new funding through a tiering system that directs new investments in state education funding to districts most in need of resources. At the end of the recent state legislative session, the General Assembly passed a state budget that includes a $350 million increase in EBF funding. As an under-resourced district, CPS will see additional state funding in FY2024, and, due to the EBF distribution construct, the additional amount will become the base for CPS’ appropriation in FY2025.

The federal government’s response to the pandemic through the passage of ESSER I, II, and III has allocated a historic level of federal funding to CPS. This one-time revenue has been budgeted to combat the effects of the pandemic on student achievement and well-being––and offset lost revenue and increased costs resulting from the pandemic. The federal aid packages have resulted in allocations totaling $2.8 billion over five fiscal years beginning in FY2020. Without this financial relief, it would not have been possible to make critical investments in schools and school staff, manage the costs incurred from meeting the technological needs of remote instruction, and ensure school buildings were equipped to welcome back students and educators safely.

The following section details the factors, assumptions, and trends that are the basis of the FY2024 revenue budget.

Local Revenues

Property Taxes

CPS is projected to receive $3,816 million in property tax revenues in FY2024, which remains the District’s largest single revenue source. A portion of the District’s property tax revenues are restricted for specific uses. Within the operating budget, CPS projects to receive $557 million from the dedicated Chicago Teacher Pension Fund (CTPF) levy, which assists CPS in paying its annual pension obligation. (For more information on the pension levy calculation, please review the Pensions chapter). $64 million is revenue from the Capital Improvement Tax levy, which includes $51 million dedicated to paying debt service on bonds issued for capital improvements and $13 million in additional levy receipts.

The remaining $3,195 million of CPS’ property taxes are free to fund any other operating costs. $3,052 million of this is from the CPS property tax education levy and $111 million is revenue from Transit Tax Increment Financing (TIF). CPS expects another $32 million from the changes to the property tax code from Public Act 102-0519, which allows Illinois school districts to receive the amount of property tax levied but not received due to property tax bill refunds processed through the State Treasurer’s Office.

The FY2024 budget includes an increase in property taxes of $131 million, $15.8 million of which comes from the District’s Transit TIF collections, $7.5 million of which is attributable to increased Capital Improvement Tax collections, and $5.5 million of which comes from increased pension levy collections. The remaining $102 million increase is driven by the District’s property tax levies for operating costs, attributable to the factors described below.

Impact of Inflation

CPS’ property tax levy is subject to PTELL, which limits the amount school districts can extend or collect from a taxing district. Each year, CPS levies property taxes to fund the operations of the public school system. The amount that CPS requests through the Board of Education cannot reflect an increase greater than the lesser of the change in the Consumer Price Index (CPI) or five percent. Tying tax increases to CPI is intended to prevent taxpayers from being overburdened by government activity that is irrespective of larger economic trends and has a subsequent impact on taxpayers.

The Illinois Department of Revenue is responsible for publishing the CPI that will be used for any government unit subject to PTELL. For the FY2024 property tax levy calculation, the CPI calculated was 6.5 percent. Following PTELL laws, the CPI is therefore capped and the applied CPI to the FY2023 extension base is five percent. Due to continued high rates of inflation nationwide, this inflation rate is consistent with the prior year’s capped rate of five percent.

Inflationary increases under PTELL impact only the District’s education levy and are expected to add $139 million to the District’s projected property tax collections.

Impact of Assessments and New Property

The Cook County Assessor’s office reassess property values on a triennial cycle. The City underwent its regular reassessment in 2021. However, forecasting the impact of the reassessment is challenging. This is not only because of the off-cycle COVID-19 reassessment performed by the Cook County Assessor’s Office in 2020, but also because Assessor Kaegi’s office has publicly shared that assessments prior to Kaegi taking office have been historically inaccurate. These assessments were not equitably or fairly distributing the tax burden to different neighborhoods and communities throughout the County, specifically throughout Chicago. The FY2024 budget includes an estimated year-over-year growth of two percent, the normal rate of growth expected in an off-cycle assessment year.

Additionally, property that was either constructed during a given tax year, or newly taxable as part of the incremental value of an expired TIF district, is not included in the base property amount that is capped under PTELL. Both new property and the incremental equalized assessed value (EAV) of an expiring TIF district are taxed at the same rate as existing properties.

In tax year 2023, an anticipated amount of $609 million of newly constructed property and $788 million of incremental TIF EAV is projected to be newly available under CPS’ tax levies and will subsequently become part of the 2024 tax base.

Changes due to assessments, new property, and expiring TIF districts are expected to add $46 million to the District’s projected property tax collections. In FY2023, however, the post-budget extension of six TIF districts reduced CPS’ projected property tax collection below budget by $83 million. This reduction, carried into FY2024, means that the total change due to these factors will be a net reduction of $37 million below the FY2023 budget.

Other Property Tax Considerations

A smaller portion of CPS operating revenues is generated by the TIF district created for the Red-Purple Modernization Program (Transit TIF) on the North Side of Chicago to modernize Chicago Transit Authority (CTA) tracks from North Avenue to Devon Avenue. By statute, CPS is due approximately 52 percent of all incremental value produced in the Transit TIF. In FY2024, CPS projects that Transit TIF revenues will be $111 million, representing an increase of just over $16 million from the FY2023 revenue budget of $95 million.

Personal Property Replacement Taxes (PPRT)

Personal Property Replacement Taxes (PPRT) are collected by the State of Illinois and distributed to local governments statewide. While the tax rates behind the collections are constant, the amount of funding CPS receives from this revenue can vary significantly from year to year. This is because PPRT is a tax that businesses and partnerships, trusts, and S corporations pay on their net Illinois income, along with a tax that public utilities pay on invested income. As corporate and investment income fluctuates, so does the amount received by local government agencies, including CPS.

The collection rates, found below, are greatest for the Corporate Income Tax  (CIT) and are therefore used to provide the basis of the CPS revenue budget.

• Corporations pay a 2.5 percent replacement tax on their net Illinois income.
• Partnerships, trusts, and S corporations pay a 1.5 percent replacement tax on their net Illinois income.
• Public utilities pay a 0.8 percent tax on invested capital.

Prior to the late 1970s, local governments and school districts were statutorily allowed to levy taxes on business properties. After the General Assembly revoked that ability, legislation instituting PPRT was passed to mitigate the revenue loss to local taxing agencies. The portion of PPRT disbursed to Illinois local government agencies reflects the amount collected in tax year 1977. For CPS, the portion of collected PPRT distributed is 14 percent.

Due to economic factors and the impact of pass-through entity tax legislation, PA 102-0658, PPRT outperformed FY2023 expectations with a projected end-of-year total of $605 million in CPS revenue, approximately $225 million greater than the FY2023 budgeted total of $380 million. In FY2024, PPRT receipts are budgeted to decrease by 4.3 percent relative to projected FY2023 revenue. CPS projects to collect $579 million in PPRT revenue in FY2024. With debt service payments from PPRT totaling $40 million, the remaining $539 million of PPRT revenue will be available to support operating costs.

This decrease reflects Illinois Corporate Income Tax (CIT) estimates from the State’s Office of Budget and Management that anticipate a year-over-year loss of 3.1 percent due to the anticipated economic factors in FY2024. The change is the net amount of CIT disbursed after diversions to the refund fund and the amount diverted by the Governor for the local government distributive fund. The refund fund deposit is a percentage established by the Illinois Department of Revenue to fund corporations' requests for refunds from CIT taxes collected.

TIF Surplus and Other Local Resources

State law requires that surplus TIF district property tax revenue is proportionally distributed to the taxing bodies within the TIF districts. CPS expects to receive $97 million in TIF surplus funding in FY2024. CPS’ share of TIF surplus funding will be finalized once the City of Chicago passes its budget in the fall.

All other local revenue includes a variety of other revenue sources, including school-generated revenue, payments from charter schools, and revenue generated through intergovernmental agreements (IGAs), including $142 million from an annual City property tax levy that funds the debt service on CPS issued bonds through the District’s School Building and Improvement IGA.

Local Contributions to Capital

FY2024 local capital revenue of $82 million assumes $65 million in reimbursements for ongoing TIF-related projects, plus $4 million from the Metropolitan Water Reclamation District and the Department of Water for Space to Grow projects. The budget also includes $13 million from Capital Improvement Tax collections not tied to existing bond issuances.

State Revenue

In FY2024, CPS’ state revenue budget is $2,491 million, which comprises 26.6 percent of CPS’ total budget. As discussed above, the state provides funding to CPS through EBF, support for pension normal cost, and several other appropriations that come in the form of reimbursable or block grants.

Evidence-Based Funding

EBF is the largest portion of funding that CPS receives from the State of Illinois. In FY2024, EBF represents 69.6 percent of the $2,491 million that CPS is projected to receive from the state.

Since its inception in 2017, the state has allocated EBF funds to districts using a formula that maintains existing funding levels for all districts and targets new funding to the districts that are least well-funded. The formula first allocates each district its Base Funding Minimum, a total reflecting the previous year’s EBF allocation. This provision provides crucial stability for CPS as it ensures that, regardless of enrollment or demographic trends, CPS will receive at least the same funding as the year prior, absent the state taking an unprecedented and highly unlikely step of disinvesting from EBF funding.

The second component of the formula allocates new, or “tier,” funding based on a formula that targets the least well-funded districts. To evaluate funding levels of districts across the state, the state first calculates “adequacy targets” for each district, reflecting the evidence-based level of resources needed for each district to educate its students. Adequacy targets include, for example, the additional resources necessary to educate low-income students, special education students, and English language learners, along with the financial resources needed to provide funding for technological devices and instructional materials.

Funding adequacy, expressed as a percentage, is then calculated by dividing each district’s available local resources by its adequacy target, indicating each district’s ability to meet its specific needs. The FY2023 calculations, the most recent calculations currently available, indicate that CPS’ funding adequacy is 74.6 percent.

Tier funding is then distributed using a formula that allocates the most funding to “Tier 1” schools, or those least adequately funded. Until FY2023, CPS had been a Tier 1 district since the inception of EBF, reflecting the high-needs of the District and historical levels of underfunding. Due primarily to short-term changes to revenue and expense factors within the EBF formula, CPS fell to Tier 2 in FY2023. At the time of publication, the Illinois State Board of Education (ISBE) has not publicly shared updated tier designations, but CPS anticipates remaining in Tier 2 for FY2024. Based on this designation and the $350 million of new EBF funding in the state’s recently passed FY2024 budget, CPS expects to receive an additional $27 million in tier funding in FY2024, less than eight percent of the total new funding.

While CPS expects to receive an additional $27 million in FY2024 tier funding, the FY2024 budget will reflect an $11 million decrease from the original FY2023 budget. This is due to the FY2023 budget assumption that CPS would remain a Tier 1 district and the projected growth in EBF funds diverted to state-commissioned charter schools, who receive a portion of CPS’ EBF allocation before it is distributed to the District.

Since 2019, CPS has received an additional allocation of EBF funding that is the result of property tax adjustments. This amount totals just over $16 million and is included in the total EBF funding amounts.

State Contribution to Teacher Pensions

FY2024 is the seventh consecutive year that CPS has benefited from the State of Illinois making payments to the Chicago Teacher Pension Fund (CTPF). While the state contributions help to offset the impact that CTPF has on CPS’ financial health, Chicago remains the only district in Illinois that is required to pay contributions to its teacher pension fund. In FY2024, the state contribution to CTPF is $322.7 million, an increase of $14 million from the prior year’s contribution of $308.7 million, but only 32 percent of the District’s total teacher pension cost. See the Pensions chapter for more information.

Additional State Funds including Categorical Grants

In addition to EBF and teacher pension contributions, CPS is projected to receive $434 million in revenue from other state-appropriated funds and categorical grants. The majority of this funding is from the Early Childhood Block Grant, which increased from $221 million in FY2023 to an estimated $249 million in FY2024. CPS also expects to receive $12 million for teacher pipeline efforts as part of a new appropriation in the state's recently passed budget.

State Contribution for Capital

The state capital revenue total of $17.1 million comprises $13.3 million in gaming revenue for new construction projects and $3.8 million in other potential state grants.

Federal Revenue

Most federal grants require the Chicago Board of Education to provide supplemental educational services for children from low-income households, children from non-English speaking families, and for neglected and delinquent children from pre-k 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 sources without any restrictions.

Every Student Succeeds Act (ESSA)

• Title I-A—Low Income: Allocated based on a district’s poverty levels, this is the largest grant received under the ESSA. The grant allows the District to provide supplemental programs to improve the academic achievement of low-income students. CPS estimates that the District will receive $265.7 million in Title I funding in FY2024. The anticipated total grant award for FY2024 is $331.5 million, which includes allowable carryover of $33.8 million from the previous year and $32 million from anticipated allocation adjustment from the state.
• Title I-A—IL Empower: This grant is a state-wide system of differentiated support and accountability to improve student learning, purposely designed to develop capacity to meet student needs. CPS anticipates a grant award of $16.2 million in FY2024.
• Title I-D—Neglected/Delinquent: This grant targets the 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 anticipated total grant award for FY2024 is $2.2 million, which includes allowable carryover of $1 million from the previous year.
• Title II-A—Improving Teacher Quality: This grant funds class size reduction, recruitment and training, mentoring, and other support services to improve teacher quality. CPS anticipates a total of $29 million to be awarded for the FY2024 Title II-A grant, which includes a current award of $19 million and an estimated $10 million in carryover from the previous year.
• Title III-A—Language Acquisition: These funds support students with limited English proficiency who meet eligibility requirements. The total funding available is estimated at $13.2 million for FY2024, which includes allowable carryover of $5 million from the previous year.
• Title IV-A—Student Support and Academic Enrichment Grants: These grants support states, local educational agencies, schools, and local communities to provide all students with access to a well-rounded education, improved student learning conditions in schools, and increased technology in order to improve the academic achievement and digital literacy of all students. CPS anticipates a total of $41.1 million to be awarded for the FY2024 Title IV-A grant, which includes a carryover of $20 million from the previous year.
• Title IV-B—21st Century Community Learning Centers: These grants provide opportunities for communities to establish schools as community learning centers and provide activities during after-school and evening hours. CPS anticipates a total of $12 million to be awarded in FY2024, a decrease of $2.7 million from the previous year.
  
  
• Title VII-A—Indian Education: Funds from this grant are used to meet the educational and cultural needs of American Indian and Alaska Native students. The anticipated total grant award for FY2024 is $114,017, which includes a decrease of $99,076 from the prior year.
  

Individuals with Disabilities Education Act (IDEA)

IDEA grants are allocated based on a state-established formula to provide supplemental funds for special education and related services to all children with disabilities from ages three through 21.

The IDEA grants include a number of programs:

• IDEA Part B Flow-Through: This is the largest IDEA grant, with the estimated award for FY2024 totaling $102.1 million.
• IDEA Room and Board: This grant provides room and board reimbursement for students attending facilities outside of Chicago and is estimated at $6.7 million in FY2024.
• Part B Pre-K: This grant offers both formula and competitive grants for special education programs for children ages 3–5 with disabilities. CPS is expected to stay level at $1.3 million from the formula grant and $472,268 from a competitive grant for FY2024.

Total FY2024 IDEA funding equals $110.6 million, including small competitive grants and carryover from the previous year in the preschool grant.

Child Nutrition Programs

CPS participates in state- and federally-funded Child Nutrition Programs, including the:

• School Breakfast Program (SBP)
• National School Lunch Program (NSLP)
• Child and Adult Care Food Program (CACFP)
• Summer Food Service Program (SFSP)
• Fresh Fruit and Vegetable Program (FFVP)

Under the Child Nutrition Programs (CNP), CPS offers free breakfast, lunch, after-school supper, after-school snacks, Saturday breakfast, and Saturday lunch during the school year. The District also serves breakfast and lunch during summer school and offers fresh fruit and vegetables to elementary school students during the school year.

In 2012, CPS began participating in the Community Eligibility Provision program. All schools are now part of this program, which provides free breakfast and lunch to all students regardless of income eligibility. CPS is reimbursed for all meals at the maximum free reimbursement rate under each CNP.

CPS anticipates $214 million in federal reimbursements for FY2024. These revenues include:

• $201 million for school lunches, breakfast, snacks, and donated foods
• $10 million for CACFP
• $3 million for FFVP

Medicaid Reimbursement

Local Education Agencies (LEAs) are required to provide special education and related services as delineated in the Individualized Education Program (IEP) or Individualized Family Service Plan (IFSP) at no cost to parents. In addition, LEAs in Illinois may now seek reimbursement for Medicaid-eligible services provided by Medicaid-eligible providers to any Medicaid-enrolled student. Medicaid provides reimbursement for the:

• Delivery of covered direct medical services provided to any Medicaid-enrolled child
• Cost of specific administrative activities, including outreach activities designed to ensure that students have access to Medicaid-covered programs and services.

Medicaid provides reimbursement for covered direct medical services including, but not limited to: audiology, developmental assessments, medical equipment, medical services, medical supplies, medication administration, nursing services, occupational therapy, physical therapy, psychological services, school health aides, social work, speech/language pathology, and specialized transportation. When these services are provided to a Medicaid-enrolled student, the services are eligible for Medicaid reimbursement at the state’s reimbursement rate, approximately half of the established cost to provide the service.

Medicaid revenues in FY2024 are projected to be $50.9 million, subject to the level of healthcare services rendered in the upcoming school year. FY2024 Medicaid revenues are strengthened by recent changes in state policy expanding eligible services and providers, continued revenue retention initiatives focused on enrolling eligible students in Medicaid, improving service capture, maximizing claiming and billing processes, and ensuring all claimable costs are reimbursed.

Other Federal Grants

This category includes competitive funding for other specific purposes, including:

• Carl D. Perkins: This grant was established to help students in secondary and post-secondary education develop academic and technical skills for career opportunities, specific job training, and occupational retraining. The FY2024 Perkins formula grant is anticipated to be $8.1 million, which includes an estimated rollover of $1.3 million.
• E-rate: The Federal Communications Commission provides funding through its E-rate program to discount the cost of telecommunications, internet access, and internal connections for schools and libraries across the country. The FY2024 federal E-rate grant is anticipated to be $8.9 million.

Elementary and Secondary School Emergency Relief Funding

In response to the COVID-19 pandemic and its subsequent impact on school districts throughout the country, the federal government has taken steps to support new pandemic-related costs and provide funding relief for impacted revenues through three rounds of emergency funding.

The first round of Elementary and Secondary School Emergency Relief funding (ESSER I) was allocated to school districts through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed by Congress in March 2020. CPS received $206 million in ESSER I funding that was used to support costs in the FY2020 and FY2021 budgets, allowing the District to support emergency remote learning and school reopening costs required by the onset of the pandemic.

Congress passed the second round of relief funding (ESSER II) in December 2020 which generated $794 million for CPS over the course of FY2021 and FY2022. 

The final, most significant round of federal funding came in April 2021 with Congressional approval of the American Rescue Plan, within which a third round of ESSER funding (ESSER III) directed nearly $1.8 billion to CPS. This funding will be available through September 2024 and, similar to ESSERs I and II, will provide the necessary funding to combat the effects of the pandemic on learning loss and the social and emotional well-being of students, safely open schools, and support priority investments.

The District projects to have $970 million in ESSER III funding remaining at the end of FY2023, of which $670 million will be included in the FY2024 budget with the remaining $300 million slated for FY2025. The FY2024 budget’s ESSER III funding is aligned to investments in the three ESSER priority areas: 1) emerging stronger post-pandemic, with a focus on a safe return to in-person instruction; 2) maintaining continuity of service including staffing and adding additional resources in schools, and 3) resource equity addressing the disproportionate impact of COVID-19 on communities of color and low-income communities. A detailed list of investments is included in the Budget Overview chapter.

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

In FY2024, 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 5.7 percent for federal sequestration. See the Debt Management chapter for more information.

Federal Contribution for Capital

The federal capital revenue total of $4 million is funded by the federal E-Rate grant.