Chicago Public Schools Presents Balanced Fiscal Year 2026 Budget that Closes $734 Million Deficit

CHICAGO - Chicago Public Schools (CPS) is asking the Chicago Board of Education Thursday to approve a proposed FY2026 budget that closes a $734 million deficit, fully protects school budgets and all of the District’s commitments to its labor partners, and eliminates the risk of mid-year cuts to schools. The proposed budget, presented to the Chicago Board of Education and posted on the District’s website two weeks ago, will go before the Board Thursday, just before the August 29 deadline for a FY2026 budget.

The proposed budget is directly aligned to feedback that CPS received from school communities and partners over the summer when CPS Interim Superintendent/CEO Dr. Macquline King hosted a series of community budget hearings and issued a survey to solicit input.

“I want to thank all partners, but especially our CPS families for their patience, feedback and participation in our community meetings this summer as we worked to address significant financial challenges while keeping our promise to maintain the school budgets first issued in May this year. The final District budget allows us to build on the academic momentum of the past few years,” said Dr. King. “This is about protecting students, their future, and the District's long-term financial health.”

The proposed $10.25 billion budget aims to support continued academic growth and achievement from preschool through high school. CPS students achieved one of the strongest academic recoveries in the country from the COVID-19 pandemic — especially in literacy. Reading proficiency for CPS elementary school students grew by more than 10 percentage points in just two years, and 8th-grade students at CPS are now achieving reading scores that are just two points off the national average — a remarkable achievement given all the challenges facing students. CPS continues to set new District records for its high school graduation rate, scholarship dollars earned, early college credit attained, and rates of college enrollment and persistence.

District officials approached its $734 million budget gap with those academic gains in mind and a keen focus on avoiding cuts to the classroom. The District found savings through a combination of central office department and operational reductions and efficiencies totaling $320 million, applying $45 million in higher-than-projected Evidence-Based Funding from the state, and increasing the District’s Fiscal Year Tax Increment Financing (TIF) revenue assumption by $79 million for what the District received in FY25. CPS is also repurposing $65 million from its debt service stabilization fund, leveraging a $25 million donation from MacKenzie Scott received in 2023, and leveraging $25 million in projected grant carryover.

Finally, the FY2026 budget stipulates that CPS will reimburse the City of Chicago for the Municipal Employees Annuity and Benefit Fund (MEABF) contingent on new FY2026 state revenue or local resources above the budgeted assumptions.

Finding savings of this magnitude has been challenging but the focus has remained on protecting students’ educational experience and upholding the District’s fiduciary responsibility to taxpayers. The Board has approximately $9.1 billion in outstanding long-term debt and $1.2 billion in short-term lines of credit debt which translates into more than $800 million a year in debt service and more than $28,000 of debt per CPS student. The debt burden includes nearly $200 million in annual costs from bonds sold in the mid 2010s to create short-term budget fixes.

While credit ratings have been upgraded in recent years, CPS remains the largest U.S. municipal junk bond issuer, meaning major rating agencies consider District bonds non-investment grade, enabling investors to charge higher interest rates to buy CPS debt and making it more costly to make critical capital investments.

An overview and details of the cost savings can be found in the District’s nearly-300-page budget book.

While the District has developed a balanced proposed budget for FY2026, officials recognize that there have been difficult reductions in staff and programming and that work must continue to address mounting revenue pressures at every level — federal, state, and local.

At the federal level, pandemic-era aid has expired, and the federal government has recently sought to withhold additional funds from CPS.

At the state level, CPS has gained from Illinois’ 2017 Evidence-Based Funding (EBF) formula, which directs more dollars to districts where students are furthest from opportunity. Yet the District still falls far short of adequacy — and is losing ground. According to the state’s own model, CPS now receives 73 percent of what it needs for “adequate” funding, down from 79 percent last year and 81 percent in FY2024 — an eight-point drop in two years. Reaching the state’s target of 90 percent adequacy by FY2027 would require an additional $985 million. CPS also faces shortfalls in state block grants and mandated categorical grants for early childhood education, transportation, and special education, compounded by inequities in teacher pension coverage and capital funding authority.

At the local level, property taxes claimed by Chicago’s Tax-Increment Financing (TIF) districts grew 266% between 2014 and 2023, with more than $3 billion now in City TIF accounts. While CPS has benefited from recent record TIF surpluses returned to the District, totalling $379 in FY25, the current program could yield more than $650 million in annual revenue for the District if all funds were shared.

Finally, CPS’ primary revenue lever remains the annual property tax levy and that is capped at five percent or the rate of inflation, whichever is lower. Grants, reimbursements, and philanthropy help but cannot replace sustainable, dedicated funding streams needed to ensure a stable, high-quality education for all students.
CPS remains committed to advocating for changes to support students and schools. Some priority next steps include:

Partner with the Board, local and State officials, other districts and public education organizations to support more fully funding the Evidence-Based Funding Formula.

Advocate for the State to increase its contribution toward teacher pensions from 35 percent to nearly 100 percent of CPS’ teacher pension.
Advocate for full funding of the State’s mandated categorical grants.
Advocate for more tools to raise money for capital improvements.
Work with City partners to strike a balance of support and accountability while the Chicago Board of Education transitions to a fully-elected Board.
In addition to the summer community meetings, the District hosted two budget hearings on August 19th to gather additional feedback from the CPS community on the proposed FY2026 operating budget. The budget must be approved by a simple majority during Thursday’s Board meeting at 3 p.m. at 42 W. Madison St.