Fiscal Year 2018 Budget

How to use this site

Users will be able to find documents and use interactive tools to help them better understand the approved CPS budget for fiscal year 2018. 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 FY18 Approved Amended Budget Book.

Download your own copy of the FY18 Approved Budget Book.

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


Organization Chart

 

Update (10/5/17): The text below reflects the FY18 Original Budget approved by the Board on August 28, 2017. For details on the FY2018 Amended Budget, please see the Interactive Reports Feature on the left-hand toolbar.

Debt Management

CPS’ Capital Improvement Program, described in the Capital chapter, each year funds a variety of investments, such as relieving overcrowding, playgrounds, air conditioning, expanded bandwidth and new computers. The Capital Improvement Program also funds core investments in facilities, such as repairing or replacing infrastructure and mechanical systems. This work creates a high quality learning environment to support a high quality education.

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

In an effort to continue to improve school facilities and lessen the impact of future debt service repaid from the District’s operating budget, in FY16, the CPS Board approved for the first time a statutorily–authorized annual Capital Improvement Tax (CIT) levy to aid in funding its ongoing Capital Improvement Program. In FY17, the Board issued its first series of Capital Improvement Tax bonds (CIT Bonds). The CIT Bonds are further described below.

 

Debt Overview

As of June 30, 2017, the Board of Education has $7.5 billion of outstanding long-term debt and $1.3 billion of outstanding short-term debt. FY18 includes appropriations of $594 million for alternate bonds, capital improvement tax bonds and PBC payments.

 

Types of Obligations

The Board is authorized by state law to issue notes and bonds and to enter into lease agreements for capital improvement projects.

As with most school districts, CPS issues bonds backed by the full faith and credit of the Board, otherwise known as General Obligation (GO) Bonds. These GO bonds are paid for from all legally available revenues of the Board.

CPS also issues a special type of GO bond called an “Alternate Revenue” GO Bond. These bonds are backed by two revenue sources and offer a number of other bondholder protections.

The first revenue source that is supporting CPS bonds is one of the following: GSA, Personal Property Replacement Taxes (PRRT), revenues derived from intergovernmental agreements with the City of Chicago, property taxes and federal interest subsidies. The majority of CPS bonds are backed by GSA. In FY18, approximately $396 million in GSA revenues will be required for debt service. In addition to debt service funded by GSA, $58 million of debt service is paid from PPRT. Debt service paid from PPRT revenues also reduces PPRT revenues available for operating purposes. Additionally, $96 million in debt service is paid by revenue resulting from Intergovernmental Agreements with the City of Chicago.

The second revenue source for all CPS Alternate Revenue GO Bonds is a property tax levy which is available to support debt service should the first pledge of revenue not be available. On an annual basis, when the first source of revenue is available to pay debt service, the property tax can be abated, as it has been every year.

The Board is authorized to issue Alternate Revenue Bonds after adopting a resolution and satisfying public notice publication and petition period requirements in lieu of a voter referendum, which is typical in other school districts. The bonds are also supported by the General Obligation pledge of the Board that it will use all legally available revenues to pay debt service.

The Public Building Commission (PBC), a local government entity which manages construction of schools and other public buildings, has in the past sold bonds which rely on CPS property tax levies. No PBC bonds have been issued since 1999 and these bonds expire in 2020. The FY18 budget includes $52 million in payments for principal and interest on these bonds.

CPS has benefitted from issuing bonds with federal interest subsidies, resulting in a very low cost of borrowing. These include Qualified Zone Academy Bonds (QZABs), which provide capital funding for schools in high poverty areas, Qualified School Construction Bonds (QSCBs), and Build America Bonds (BABs), the latter two created by the American Recovery and Reinvestment Act of 2009 (ARRA). With the expiration of ARRA, new QSCBs and BABs are no longer available, although the federal government continues to pay the interest subsidy to CPS. The FY18 budget includes $25 million of federal subsidies for debt service.

In FY16, CPS began levying a Capital Improvement Tax levy to fund capital projects. After the CIT was authorized by the City Council, in its initial year, it generated $45 million. In FY18 the budget includes a CIT levy of $52 million. In FY17, CPS sold $730 million of dedicated revenue CIT bonds to fund capital projects. The FY18 budget includes appropriations of approximately $44 million to pay debt service on the CIT bonds. The CIT bonds are not Alternate Revenue GO bonds. The bonds are limited obligations of the Board payable solely from the CIT levy. As a result of the structure, the CIT bonds received a single “A” bond rating at the initial issuance, allowing CPS to achieve a lower borrowing cost.

 

Debt Management Tools and Portfolio Mix

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

Typically, CPS issues fixed-rate bonds, which pay a set, agreed upon interest rate according to a schedule established at the time of debt issuance. However, about 14 percent of CPS’s current debt was originally issued with a variable rate structure where by the interest rates in a short-term mode are established pursuant to a margin over an index for a pre-determined amount of time. Beginning in 2016, at the expirations of their initial periods, CPS elected not to reoffer or refinance certain of such bonds, and as a result the interest rate increased to a fixed rate. CPS is actively managing the debt service on these bonds and working toward a refinancing of the debt into long-term fixed rate bonds as market conditions and timing permits.

 

Chart 1: Summary of Fixed Rate and Variable Rate Debt
(as of June 30, 2017)

 

 

Credit Ratings

All rating agencies continue to express concern about an ongoing structural fiscal imbalance, weakened liquidity position and rising pension obligations of the Board. These rating agencies are independent entities and their purpose is to give investors, or bondholders, an indication of the creditworthiness of a government entity. A high credit score can lower the cost of debt issuance, much the same way a strong personal credit score can reduce the interest costs of loans and credit cards. Ratings consist of a letter “grade”, such as A, BBB, BB or B, and a credit “outlook”, or expectation of the direction of the letter grade. Thus, a “negative outlook” anticipates a downgrade to a lower letter grade, a “stable outlook” means the rating is expected to remain the same, and a “positive outlook” may signal an upgrade to a higher, better rating.

CPS meets frequently with the credit rating agencies about its budget, audited financial results, debt plan and management initiatives to ensure the agencies have the most updated information possible. The rating agencies take several factors into account in determining any rating, including management, debt profile, financial results, liquidity and economic and demographic factors.

CPS’ current general obligation credit ratings from Standard and Poor’s, Fitch Ratings, Moody’s Investor Service are B, B+ and B3, respectively. Kroll Bond Rating Agency (added in FY15) currently rates the CPS Series 2016A general obligation bonds BBB and all other CPS general obligation bonds BBB-. All rating agencies hold CPS on a negative outlook.

In addition to the CPS general obligation bond rating, in FY17, the CIT bonds – which is a new and separate credit structure from the existing CPS general obligation credit – received a new credit rating. The CIT credit structure received an investment grade rating from two rating agencies in FY17. Fitch Ratings rated the CIT credit “A” and Kroll Bond Rating Agency rated the CIT credit “BBB”.

 

FY18 Challenges

FY18 presents a continued challenging environment for CPS to maintain ratings and issue bonds. CPS faced an additional downgrade by Standard and Poor’s in FY17 due to the inability of the State to provide equal educational funding to CPS, continued drawdown on reserves, and an increased fixed cost structure as a result of the contract with the teachers’ union. These downgrades increase CPS’ cost of borrowing, further increasing revenues needed to pay debt service. Without additional State support for education funding that treats Chicago students equally, these downward rating trends will continue and further increase interest costs and limit access to the capital markets.

Additionally, as CPS continues to issue debt repaid by GSA to invest in the District’s facilities and/or restructure existing near term payments for one-time budgetary relief, future debt service will rise annually. In FY18, approximately $396 million of GSA will be required to fund debt service.

The drawdown on reserves and fund balance to help support operations presents liquidity challenges as discussed in the Cash Management Chapter. In order to provide sufficient liquidity to cover daily operating expenses, CPS will issue working capital lines of credit. These working capital lines of credit are issued as Tax Anticipation Notes (TANs), which are repaid from property taxes. The pending line of credit will be repaid from the 2017 tax year, which is collected largely in FY18.

 

FY18 Debt Service Costs

As shown in the table below, FY18 includes total appropriations of approximately $594 million for alternate bonds, CIT Bonds and PBC payments.

CPS is required to set aside debt service a year in advance for GSA funded debt and one-and-a-half years in advance for PPRT and CIT bond funded debt service. These payments are held in trust with an independent trustee, as required by the bond indentures. PPRT used to pay Alternate Revenue bonds is deposited directly from the State to a trustee, and the capital improvement tax levy used to pay CIT bonds is deposited directly from Cook County to a trustee. Therefore, the FY18 Revenues shown for the Debt Service Funds represent the amount that is to be set aside for these future debt payments.

Because of this set-aside requirement, the majority of the appropriations for FY18 represent the amount that is to be paid from revenues set aside in the prior year. Table 1 provides information on the debt service fund balance at the beginning of the year, the expenditures that are made from the debt service fund and the revenues that are deposited to the fund to largely fund the debt service requirements for the following fiscal year.

 

Table 1: FY15-18 Summary of Debt Service Funds
(In Millions)

 

FY16 Actual

FY17 Estimated

FY18 Budget

Beginning Fund Balance  

602.4

469.3

566.7

 

 

 

 

Revenues:

 

 

 

Revenues

 

 

 

Property Taxes

52.4

52.1

52.1

PPRT

45.6

58.3

58.3

State Aid (e.g., GSA)

114.0

373.4

396.1

Federal Interest Subsidy

25.0

24.8

24.8

Other Local (City IGA and Interest Earnings)

5.2

95.5

95.5

Capital Improvement Tax

 

-

43.6

Total Revenue

242.2

604.1

670.4

 

 

 

 

Expenses:

 

 

 

Existing Bond Principal payment

139.1

152.6

162.6

Existing Bond Interest payment

310.8

378.7

426.7

Fees

5.4

7.3

4.7

Total Existing Bond Debt Service

455.3

538.6

594.0

 

 

 

 

Other Financing Sources

 

  Net amounts from debt issuances (incl. capitalized interest)

296.1

68.0

326.6

  Discount

(45.1)

(36.1)

(33.4)

  Transfers in/(out)

(170.9)

-

(326.6)

Ending Fund Balance

469.3

566.7

609.7

 

Future Debt Service Profile

The following graph illustrates the fiscal challenges of CPS’ debt obligations on currently outstanding bonds as of June 30, 2017. This graph does not show the impact of any future bonds required to support future capital budgets or debt restructuring.

 


*Does not include future long-term bond financings or current and future short-term financings.

 

Measuring Debt Burden

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

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

Debt Per Capita
The Board’s per capita debt burden, or total debt divided by the City of Chicago’s population, has increased in the last decade. As reported in the FY16 Comprehensive Annual Financial Report, General obligation debt per capita is $2,440. This is still considered moderate to slightly above average relative to other comparable school districts.

 

A copy of the Debt Management Policy is available at the Board’s website at http://policy.cps.edu/download.aspx?ID=42

 

Table 2: OUTSTANDING LONG-TERM DEBT
as of June 30, 2017

Description

Closing
Date

Maturity
Date

Principal
Outstanding

Pledged Funding Source for Debt Service

PBC Series A of 1992

1/1/1992

1/1/2020

 78,525,000

Property Tax

PBC Series B of 1999

3/1/1999

12/1/2018

 38,325,000

Property Tax

Unlimited Tax G.O. Series 1997A*

12/3/1997

12/1/2030

 0

IGA / PPRT

Unlimited Tax G.O. Series 1998B-1*

10/28/1998

12/1/2031

 240,143,282

IGA / PPRT

Unlimited Tax G.O. Series 1999A*

2/25/1999

12/1/2031

 391,893,381

IGA / PPRT

Unlimited Tax G.O. Series 2002A

9/24/2002

12/1/2022

 24,885,000

IGA

QZAB Series 2003C

10/28/2003

10/27/2017

4,585,000

State Aid

Unlimited Tax G.O. Refunding, Series 2004A

4/6/2004

12/1/2020

 70,690,000

PPRT / State Aid

Unlimited Tax G.O. Series 2005AB

6/27/2005

12/1/2032

 190,015,000

PPRT / State Aid

QZAB Series 2006A

6/7/2006

6/1/2021

6,852,800

State Aid

Unlimited Tax G.O. Series 2006B

9/27/2006

12/1/2036

 280,730,000

State Aid

Unlimited Tax G.O. Series 2007B

9/4/2007

12/1/2024

197,765,000

IGA / PPRT

Unlimited Tax G.O. Series 2007C

9/4/2007

12/1/2020

                      3,740,000

IGA / PPRT

Unlimited Tax G.O. Series 2007D

12/13/2007

12/1/2029

                 169,195,000

State Aid

Unlimited Tax G.O. Series 2008A

5/13/2008

12/1/2030

                 262,785,000

IGA / PPRT

Unlimited Tax G.O. Series 2008B

5/13/2008

3/1/2034

                 177,550,000

State Aid

Unlimited Tax G.O. Series 2008C

5/1/2008

12/1/2032

                 464,655,000

State Aid

Unlimited Tax G.O. Series 2009D

7/29/2009

12/1/2022

                   40,940,000

State Aid

Unlimited Tax G.O. BAB Series 2009E

9/24/2009

12/1/2039

518,210,000

State Aid / Federal Subsidy

Unlimited Tax G.O. Series 2009F

9/24/2009

12/1/2016

 0

State Aid / Federal Subsidy

Unlimited Tax G.O. QSCB Series 2009G

12/17/2009

12/15/2025

 254,240,000

State Aid

Unlimited Tax G.O. QSCB Series 2010C

11/2/2010

11/1/2029

257,125,000

State Aid

Unlimited Tax G.O. BAB Series 2010D

11/2/2010

12/1/2040

125,000,000

State Aid

Unlimited Tax G.O. Refunding Series 2010F

11/2/2010

12/1/2031

                  161,300,000

State Aid

Taxable Unlimited Tax G.O. Refunding Series 2010G

11/2/2010

12/1/2017

                      5,235,000

State Aid

Unlimited Tax G.O. Series 2011A

11/1/2011

12/1/2041

402,410,000

State Aid

Unlimited Tax G.O. Refunding Series 2011C-1

12/20/2011

3/1/2032

                    42,200,000

State Aid

Unlimited Tax G.O. Refunding Series 2011C-2

12/20/2011

3/1/2032

                    41,500,000

State Aid

Unlimited Tax G.O. Series 2012A

8/21/2012

12/1/2042

468,915,000

State Aid

Unlimited Tax G.O. Series 2012B

12/21/2012

12/1/2035

109,825,000

State Aid

Unlimited Tax G.O. Series 2013A-1

5/22/2013

3/1/2026

 81,010,000

State Aid

Unlimited Tax G.O. Series 2013A-2

5/22/2013

3/1/2035

124,320,000

State Aid

Unlimited Tax G.O. Series 2013A-3

5/22/2013

3/1/2036

157,055,000

State Aid

Unlimited Tax G.O. Series 2015A

3/26/2015

3/1/2032

84,000,000

State Aid

Unlimited Tax G.O. Series 2015G

3/26/2015

3/1/2032

                   83,500,000

State Aid

Unlimited Tax G.O. Series 2015CE

4/29/2015

12/1/2039

300,000,000

State Aid

Unlimited Tax G.O. Series 2016A

2/8/2016

12/1/2044

725,000,000

State Aid

Unlimited Tax G.O. Series 2016B

7/29/2016

12/1/2046

150,000,000

State Aid

Capital Improvement Tax 2016

1/4/2017

4/1/2046

729,580,000

Capital Improvement Tax

Total Principal Outstanding

 

 

7,463,699,463

 

*Excludes accreted interest accrued on 0% coupon capital appreciation bonds and short-term line of credit.

 

Table 3: OUTSTANDING SHORT-TERM DEBT
as of June 30, 2017

 

Description

Closing
Date

Maturity
Date

Principal
Outstanding

Pledged Funding Source for Debt Service

Tax Anticipation Notes, Series 2016A1

9/8/2016

12/15/2017*

 325,000,000

Education Fund Property Tax

Tax Anticipation Notes, Series 2016A2

10/3/2016

12/15/2017*

150,000,000

Education Fund Property Tax

Tax Anticipation Notes, Series 2016A3

11/10/2016

12/15/2017*

475,000,000

Education Fund Property Tax

Grant Anticipation Notes, Series 2017A

6/19/2017

3/30/2018

275,000,000

State Block Grants

Grant Anticipation Notes, Series 2017B

6/26/2017

3/30/2018

112,000,000

State Block Grants

Total Principal Outstanding

 

 

$1,337,000,000

 

 

*The maturity date of the 2016A1, A2 and A3 TANs is the earlier of (A) December 15, 2017 or (B) (1) September 30, 2017, if the Tax Penalty Date is on or prior to August 1, 2017 or (2) the 60th day following the Tax Penalty Date, if the Tax Penalty Date is later than August 1, 2017.

 

Table 4: SCHEDULE OF GENERAL OBLIGATION DEBT SERVICE REQUIREMENTS TO MATURITY*
as of June 30, 2017 ($ in Thousands)

 

Fiscal Year ending June 30

Total Existing General Obligation Bond Principal

Total Existing General Obligation Bond Interest

Total Existing G.O. Bond Debt Service

G.O PBC
Leases

TOTAL

2018

130,639

341,731

472,370

52,070

524,440

2019

204,490

394,941

599,431

52,099

651,530

2020

222,886

402,192

625,078

30,636

655,714

2021

248,716

393,921

642,637


642,637

2022

250,473

385,696

636,169


636,169

2023

257,002

373,160

630,162


630,162

2024

265,488

363,209

628,697


628,697

2025

330,039

352,585

682,624


682,624

2026

344,681

335,524

680,205


680,205

2027

298,621

317,958

616,579


616,579

2028

262,543

356,691

619,234


619,234

2029

271,383

346,185

617,568


617,568

2030

270,124

318,815

588,939


588,939

2031

235,916

348,360

584,276


584,276

2032

161,565

163,420

324,985


324,985

2033

170,530

153,419

323,949


323,949

2034

180,140

142,883

323,023


323,023

2035

190,135

131,865

322,000


322,000

2036

201,040

120,987

322,027


322,027

2037

212,795

109,647

322,442


322,442

2038

225,320

97,483

322,803


322,803

2039

238,520

84,594

323,114


323,114

2040

252,860

71,078

323,938


323,938

2041

268,025

55,915

323,940


323,940

2042

283,580

40,745

324,325


324,325

2043

105,000

24,800

129,800


129,800

2044

110,000

17,450

127,450


127,450

2045

72,600

9,750

82,350


82,350

2046

77,400

5,031

82,431


82,431

TOTAL

$6,342,511

$6,260,035

$12,602,546

$134,803

$12,737,351

*Excludes issues completed after 6/30/17 and future anticipated transactions which were included in the FY18 budget.

 

Table 5: SCHEDULE OF CAPITAL IMPROVEMENT TAX BONDS DEBT SERVICE REQUIREMENTS TO MATURITY
as of June 30, 2017 ($ in Thousands)

Fiscal Year ending June 30

TOTAL

2018

43,539

2019

43,539

2020

43,539

2021

43,539

2022

43,539

2023

43,539

2024

43,539

2025

43,539

2026

43,539

2027

43,539

2028

43,539

2029

43,539

2030

43,539

2031

43,539

2032

78,454

2033

78,451

2034

78,453

2035

78,453

2036

78,455

2037

78,451

2038

78,450

2039

78,452

2040

78,451

2041

78,453

2042

78,450

2043

78,452

2044

78,450

2045

78,451

TOTAL

$1,707,872

Page Last Modified on Thursday, October 05, 2017