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Debt Management 2020

Update (11/5/2019)

The text below reflects the FY2020 original budget that was approved by the Board of Education on August 28, 2019. For details on the FY2020 amended budget, please follow this link. Additionally, the amended budget information is reflected in the Interactive Reports feature found on the left-hand toolbar.

CPS’ Capital Improvement Program, described in the Capital chapter, funds long-term investments that provide our students with a world class education in high-quality learning environments. CPS relies on the issuance of bonds to fund the investments laid out in our Capital Improvement Program, which include roofs, envelopes, and windows; state-of-the-art high school science labs; high-speed internet and digital devices; playgrounds and athletic fields; and expansion of full-day Pre-K and other high-quality programmatic investments. Bonds are debt instruments that are similar to a loan, requiring annual principal and interest payments.

Debt Overview

As of June 30, 2019, the Board of Education has approximately $8.4 billion of outstanding long-term debt and $450 million of outstanding short-term debt. FY2020 includes appropriations of $700 million for alternate bonds, capital improvement tax bonds, and Public Building Commission payments.

In FY2018, due to advocacy from parents, educators and courageous elected officials from Chicago and throughout the state, the State of Illinois approved Public Act 100-465 (PA 100-465). This created a new funding formula for school districts throughout the state, including CPS. The new Evidence-Based Funding formula (EBF or EBF Formula) replaces the prior General State Aid (GSA) formula. As a result of PA 100-465 and the EBF Formula, most of the outstanding CPS bonds that were previously repaid from GSA revenues will now be paid by EBF revenues going forward.

The EBF formula provides more funding stability for the Board’s fixed costs, including capital, but it is also a major revenue source for core academic priorities. Therefore, CPS can more effectively balance day-to-day classroom needs with the need for quality education facilities.

To continue to improve school facilities and lessen the impact of future debt service repaid from the district’s operating budget, CPS will use the statutorily-authorized annual Capital Improvement Tax (CIT) levy that the Board approved in FY2016 to aid in funding its ongoing Capital Improvement Program. In FY2017, the Board issued its first series of Capital Improvement Tax bonds (CIT Bonds). As of June 30, 2019, a total of three series of CIT Bonds have been issued. The CIT Bonds are further described below.

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: EBF, Personal Property Replacement Taxes (PPRT), revenues derived from intergovernmental agreements with the City of Chicago, property taxes, and federal interest subsidies. The majority of CPS bonds are backed by EBF. In FY2020, approximately $382 million in EBF revenues will be required for debt service, compared to $283 million in FY2019 and $323 million in FY2018. In addition to debt service funded by EBF, $64 million of debt service will be paid from PPRT in FY2020. Debt service paid from PPRT revenues also reduces PPRT revenues available for operating purposes.

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 levy will be abated and not extended, 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 GO pledge of the Board to 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 CPS will make its’ last PBC bond payment in FY2020 from property tax revenues received in FY2019. The FY2020 budget includes $31 million in payment appropriations 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 FY2020 budget includes $25 million of federal subsidies for debt service.

In FY2016, CPS began levying a Capital Improvement Tax levy to fund capital projects. After the CIT was authorized by the City Council, it generated $45 million in its initial year. In FY2017, CPS sold the first series of dedicated revenue CIT bonds to fund capital projects, with additional issues sold in subsequent years. As of June 30, 2019, CPS has sold three series of CIT bonds, and the total amount of CIT Bonds outstanding is $881 million.

The FY2020 budget includes a CIT levy of $60 million and appropriations of approximately $47 million to pay debt service on these 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 and have maintained this rating, 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 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, generate cost savings, address interim cash flow needs, and assist capital asset planning.

Typically, CPS issues long-term fixed-rate bonds, which pay a set interest rate according to a schedule established at the time of debt issuance. However, CPS has also periodically issued long-term bonds with a variable rate structure whereby the interest rates in a short-term mode are established pursuant to a margin over an index for a predetermined amount of time. As of June 30, 2019, 5.2% of the outstanding CPS long-term debt is variable rate, and there are no expirations of their initial periods with these issues.

Chart 1: Summary of Long-Term Fixed Rate and Variable Rate Debt
(as of June 30, 2019)

A pie chart of the CPS operating budget for charter funding

Credit Ratings

Credit 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.

As a result of education funding reform that occurred in FY2018, all rating agencies revised their long-term GO bond rating outlooks on CPS from negative to stable or positive during FY2018 and Fitch Ratings provided a one notch upgrade. Because education funding reform provided the new EBF Formula, an increase in the required State contribution to CPS teachers’ pensions, and the ability for CPS to collect a pension property tax levy, CPS is on much stronger financial footing. In FY2019, CPS received ratings upgrades from Moody’s and Standard and Poor’s.

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, and Moody’s Investor Service are B+ Stable, BB- Positive and B2 Stable, respectively. Kroll Bond Rating Agency currently rates the CPS Series 2016AB, Series 2017BCDEFG&H and Series 2018AB general obligation bonds BBB Positive, and all other CPS general obligation bonds BBB- Positive.

In addition to the CPS general obligation bond rating, the CIT bonds – which were first issued in FY2017 as a new and separate credit structure from the existing CPS general obligation credit – contain a separate and distinct credit rating. The CIT credit structure received an investment grade rating from two rating agencies at inception in FY2017. Currently, Fitch Ratings rates the CIT credit “A” Stable and Kroll Bond Rating Agency rated the CIT credit “BBB” Positive.

FY2020 Liquidity and Short-Term Borrowing

As a result of education funding reform, the district has improved its cash position and reduced its short-term borrowing. Please see further discussion in the Cash Management chapter. CPS reduced its short-term borrowing in FY2019 by $250 million, declining from $1.09 billion in FY2018 to $844 million in FY2019. By relying less on short-term borrowing, the district saved approximately $33 million in short-term interest costs in FY2019 and created structural budgetary relief for future fiscal years. Additionally, CPS spent approximately six months of the year in a net positive cash position, which continues to be an improvement from recent years.

CPS will continue to issue Tax Anticipation Notes (TANs) in FY2020 to cover operating cash flow needs, which are repaid from property taxes.

FY2020 Debt Service Costs

As shown in the table below, FY2020 includes total appropriations of approximately $700 million for alternate bonds, CIT Bonds, and PBC payments.

CPS is required to set aside debt service a year in advance for EBF-funded debt and one-and-a-half years in advance for PPRT and CIT bond-funded debt service. The FY2020 revenues shown for the debt service funds will be set aside for these future debt payments, which are required by bond indentures to be held in trust with an independent trustee. 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. Because of this set-aside requirement, the majority of the appropriations for FY2020 will be paid from revenues set aside in FY2019. 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 largely fund the debt service requirements for the following fiscal year.

Table 1: FY2018-2020 Summary of Debt Service Funds
($ In Millions)
Beginning Fund Balance 577.2 785.5 749.9
Property Taxes 51.4 30.6 0.0
PPRT 58.3 34.9 64.3
EBF 323.4 282.7 382.0
Federal Interest Subsidy 25.0 24.9 24.7
Other Local (City IGA and Net of Interest Earnings) 106.5 112.5 142.3
CIT 43.7 50.5 51.1
Total Revenue 608.3 536.1 664.4
Existing Bond Principal payment 137.4 158.6 194.5
Existing Bond Interest payment 467.2 457.3 491.2
Fees 15.8 7.6 1.8
Total Existing Bond Debt Service 620.4 623.5 700.3
Other Financing Sources
Net Amounts from Debt Issuances 506.7 52.6 44.8
Transfers in /(out) (286.3) (0.8) (0.5)
Total other Financing Sources /(Uses) 220.4 51.8 44.3
Ending Fund Balance 785.5 749.9 758.3

Future Debt Service Profile

The following graph illustrates CPS’ debt obligations on outstanding bonds as of June 30, 2019. This graph does not show the impact of any future bonds required to support future capital budgets or debt restructuring.

Chart 2: CPS Debt Service Funding Schedule
(as of June 30, 2019)
($ in Thousands)

A bar chart of the CPS debt service funding schedule as of June 30, 2019

Note: 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, external stakeholders also look at the “debt burden” 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, including 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 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 one 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 FY2018 Comprehensive Annual Financial Report, General Obligation debt per capita is $2,680. This is still considered moderate to slightly above average relative to other comparable school districts. The Debt Management Policy is available at the Board’s website at

Table 2: Outstanding Long-Term Debt
(as of June 30, 2019)
Description Closing Date Maturity Date Principal Outstanding Pledged Funding Source
for Debt Service
PBC Series A of 1992 01/01/92 01/01/20 27,675,000 Property Tax
ULT GO Series 1998B-1* 10/28/98 12/01/31 225,035,858 IGA / PPRT
ULT GO Series 1999A* 02/25/99 12/01/31 330,304,009 IGA / PPRT
ULT GO Refunding Series 2004A 04/06/04 12/01/20 25,410,000 PPRT / EBF
ULT GO Series 2005A 06/27/05 12/01/32 151,965,000 PPRT / EBF
QZAB Series 2006A 06/07/06 06/01/21 6,852,800 EBF
ULT GO Series 2006B 09/27/06 12/01/36 22,005,000 EBF
ULT GO Series 2008A 05/13/08 12/01/30 262,785,000 IGA / PPRT
ULT GO Series 2008B 05/13/08 03/01/34 169,425,000 EBF
ULT GO Series 2009D 07/29/09 12/01/22 9,650,000 EBF
ULT GO BAB Series 2009E 09/24/09 12/01/39 497,545,000 EBF / Federal Subsidy
ULT GO QSCB Series 2009G 12/17/09 12/15/25 254,240,000 EBF
ULT GO QSCB Series 2010C 11/02/10 11/01/29 257,125,000 EBF
ULT GO BAB Series 2010D 11/02/10 12/01/40 125,000,000 EBF
ULT GO Refunding Series 2010F 11/02/10 12/01/31 131,515,000 EBF
ULT GO Series 2011A 11/01/11 12/01/41 402,410,000 EBF
ULT GO Series 2012A 08/21/12 12/01/42 468,915,000 EBF
ULT GO Series 2012B 12/21/12 12/01/35 109,825,000 EBF
ULT GO Series 2015CE 04/29/15 12/01/39 300,000,000 EBF
ULT GO Series 2016A 02/08/16 12/01/44 725,000,000 EBF
ULT GO Series 2016B 07/29/16 12/01/46 150,000,000 EBF
CIT Series 2016 01/04/17 04/01/46 729,580,000 CIT
ULT GO Series 2017A 06/13/17 12/01/46 285,000,000 EBF
ULT GO Series 2017B 06/13/17 12/01/42 215,000,000 EBF
CIT Series 2017 11/30/17 04/01/46 64,900,000 CIT
ULT GO Series 2017C 11/30/17 12/01/34 351,485,000 EBF
ULT GO Series 2017D 11/30/17 12/01/31 79,325,000 EBF
ULT GO Series 2017E 11/30/17 12/01/21 22,180,000 PPRT
ULT GO Series 2017F 11/30/17 12/01/24 164,925,000 IGA
ULT GO Series 2017G 11/30/17 12/01/44 126,500,000 PPRT / EBF
ULT GO Series 2017H 11/30/17 12/01/46 280,000,000 PPRT / EBF / IGA
ULT GO Series 2018A 06/01/18 12/01/35 552,030,000 EBF
ULT GO Series 2018B 06/01/18 12/01/22 10,220,000 EBF
ULT GO Series 2018C 12/13/18 12/01/32 450,115,000 EBF
ULT GO Series 2018D 12/13/18 12/01/46 313,280,000 PPRT / EBF
CIT Series 2018 12/13/18 12/01/46 86,000,000 CIT
Total Principal Outstanding     $8,383,222,667  
Table 3: Outstanding Short-Term Debt
(as of June 30, 2019)
Description Maturity Date Principal Outstanding Pledged Funding Source for Debt Service
Tax Anticipation Notes, Series 2018C 12/15/19* 200,000,000 Ed Fund Property Tax
Tax Anticipation Notes, Series 2018G 10/01/19 250,000,000 Ed Fund Property Tax
Total Principal Outstanding   $450,000,000  

Note: The maturity date of the 2018C TANs is the earlier of (A) December 15, 2019 or (B) (1) September 30, 2019, if the Tax Penalty Date is on or prior to August 1, 2019 or (2) the 60th day following the Tax Penalty Date, if the Tax Penalty Date is later than August 1, 2019.

Table 4: Schedule of General Obligation Debt Service
Budgeted Requirements to Maturity*
(as of June 30, 2019)
($ 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 Total Existing G.O PBC Leases TOTAL
2020 215,801 422,510 638,311 30,635 668,946
2021 231,106 439,655 670,761   670,761
2022 254,578 433,567 688,145   688,145
2023 260,102 422,113 682,215   682,215
2024 269,363 414,560 683,923   683,923
2025 333,754 403,980 737,734   737,734
2026 318,576 388,504 707,080   707,080
2027 322,053 443,894 765,947   765,947
2028 289,494 408,187 697,681   697,681
2029 300,578 405,823 706,401   706,401
2030 287,966 389,510 677,476   677,476
2031 264,226 337,435 601,661   601,661
2032 196,040 221,548 417,588   417,588
2033 205,870 210,950 416,820   416,820
2034 195,005 202,309 497,314   397,314
2035 211,140 189,140 400,280   400,280
2036 223,290 171,429 394,719   394,719
2037 232,370 164,695 397,065   397,065
2038 246,265 152,070 398,335   398,335
2039 260,930 137,705 398,635   398,635
2040 276,830 122,631 399,461   399,461
2041 293,675 105,794 399,469   399,469
2042 314,039 79,793 393,832   393,832
2043 280,628 75,763 356,391   356,391
2044 285,752 49,579 335,331   335,331
2045 302,876 35,295 338,171   338,171
2046 301,880 17,941 319,821   319,821
TOTAL $7,147,187 $6,846,380 $14,020,567 $30,635 $14,051,202

Note: Table is based on budgeted debt service requirements to be deposited within each fiscal year. Excludes issues completed after June 30, 2019 and any future anticipated transactions which were included in the FY2020 budget.

Table 5: Schedule of Capital Improvement Tax Debt Service
Budgeted Requirements to Maturity*
(as of June 30, 2019)
($ in Thousands)
Fiscal Year ending June 30 Total Existing CIT Bond Principal Total Existing CIT Bond Interest TOTAL
2020   51,084 51,084
2021   51,084 51,084
2022   51,084 51,084
2023   51,084 51,084
2024   51,084 51,084
2025   51,084 51,084
2026   51,084 51,084
2027   51,084 51,084
2028   51,084 51,084
2029   51,084 51,084
2030   51,084 51,084
2031   51,084 51,084
2032   54,201 54,201
2033 42,615 51,964 94,579
2034 45,000 49,602 94,602
2035 47,535 47,106 94,641
2036 50,205 44,322 94,527
2037 53,170 41,414 94,584
2038 56,260 38,339 94,599
2039 59,540 30,417 89,957
2040 63,010 26,731 89,741
2041 66,685 22,829 89,514
2042 70,565 18,700 89,265
2043 74,680 14,328 89,008
2044 79,040 9,702 88,742
2045 83,645 4,804 88,449
2046 88,530 51,084 88,530
TOTAL $880,480 $1,067,467 $1,947,947

Note: Excludes issues completed after June 30, 2019 and any future anticipated transactions which were included in the FY2020 budget.

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