Debt Management

Debt Overview

The Chicago Board of Education (Board) is authorized by state law to issue notes and bonds, enter into lease agreements for capital improvement projects, and assist in the management of cash flow and liquidity. As of June 30, 2026, the Board has approximately $9.3 billion of outstanding long-term debt and $861 million of outstanding short-term debt. FY2027 includes appropriations of $794 million for long-term debt service payments. Approximately $27.0 million of appropriations for interest on short-term debt is included in the operating budget.

FY2027 appropriations for payments on long-term debt fell by approximately $269 million versus FY2026. However, the decrease was primarily attributable to debt service on CPS’ 2009G Qualified School Construction Bonds maturity payment in FY2026. Based on the terms of that specific bond series, beginning in FY2011, CPS made required annual deposits into a sinking fund in anticipation of a final principal payment due in FY2026. Because the funding for that principal payment came from the sinking fund, it did not require additional funding or add to the District’s FY2026 annual debt service costs funded by operating dollars.

Capital Improvements and Debt

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 the 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 the expansion of full-day pre-k and other high-quality programs. Bonds are debt instruments that are similar to a loan, requiring annual principal and interest payments.

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. As of June 30, 2026, all CPS outstanding long-term debt is fixed rate.

Debt Management Tools and Portfolio

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 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. CPS issues two types of long-term debt: Alternate Revenue General Obligation bonds and Capital Improvement Tax bonds.

Alternate Revenue General Obligation Bonds
Similar to most Illinois 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 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. As of June 30, 2026, the total amount of outstanding Alternate Revenue GO bonds is $7.9 billion.

The first revenue source that supports CPS alternate revenue bonds is one of the following: Evidence Based Funding (EBF) from the State of Illinois (known as “General State Aid'' prior to FY2018), Personal Property Replacement Taxes (PPRT), revenues derived from intergovernmental agreements (IGAs) with the City of Chicago, and federal interest subsidies. The majority of CPS bonds are backed by EBF. In FY2027, approximately $564 million in EBF revenues will be required for debt service, compared to $394 million in FY2026 and $502 million in FY2025. In addition to debt service funded by EBF, $102 million of debt service will be paid from PPRT in FY2027. Debt service paid from PPRT revenues also reduces PPRT revenues available for operating purposes. Additionally, $142 million in debt service will be paid by revenue resulting from IGAs.

CPS has benefited from issuing bonds with federal interest subsidies, resulting in a low cost of borrowing. These include Qualified School Construction Bonds (QSCBs) and Build America Bonds (BABs) created by the American Recovery and Reinvestment Act of 2009 (ARRA). The FY2027 budget includes $23 million of federal subsidies for debt service. Additionally, the 2010C QSCB series has a sinking fund into which CPS has made required annual deposits since 2021. The sinking fund and its earnings will offset payment of the final maturity in FY2030.

The second revenue source for all CPS Alternate Revenue GO bonds is a property tax levy that 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 rather than extended, as has been the practice 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.

Capital Improvement Tax Bonds
In FY2016, CPS began levying a Capital Improvement Tax (CIT) levy to fund capital projects. As of June 30, 2026, CPS has sold four series of CIT bonds, and the total amount of outstanding CIT bonds is $1.4 billion.

The FY2027 budget includes a CIT levy and appropriations of approximately $80 million to pay debt service on CIT bonds. The CIT bonds are not Alternate Revenue GO bonds. They are limited obligations of the Board payable solely from the CIT levy.

Tax Anticipation Notes
In recent fiscal years, the Board has relied on short-term borrowing to fund operations and liquidity. These short-term borrowings have primarily consisted of the issuance of tax anticipation notes (TANs), payable from the collection of education fund real estate property taxes levied by the Board for a given year.

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, just as 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 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. In FY2026, Kroll Bond Rating Agency (KBRA) lowered its rating from BBB to BBB-.

In addition to the CPS GO 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 KBRA rates the CIT credit BBB+ Stable.

FY2027 Liquidity and Short-term Borrowing

It is anticipated that the Board will issue Educational Purposes TANs in FY2027 to fund operating liquidity and cash flow needs similar to prior fiscal years. For the last several years, the Board has closed on multiple annual series of TANs for working capital purposes. The TANs were issued as either public sales or direct placement with investors. The initial issuance of TANs typically occurs in the fall or winter. Subsequently, the principal amount of TANs outstanding increased with cash flow needs and has typically peaked initially in February due to the annual debt service deposit for the Board’s alternate revenue bonds required on February 15 for most bond series. The collection of the first installment of property taxes has historically improved the Board’s cash position and resulted in a repayment of a portion of the Board’s outstanding TANs. A second peak is typically experienced in July, due to additional cash needs and the Board’s annual Chicago Teachers' Pension Fund (CTPF) pension contribution required on June 30. TANs are typically repaid fully in August with the collections of the second installment of property taxes. However, in FY2023, FY2024, and FY2026, Cook County delayed the collection of second installment property taxes until December, necessitating additional TANs being borrowed by CPS. The FY2027 operating budget includes appropriations of approximately $27.0 million to pay debt service on TANs.

FY2027 Debt Service Costs

As shown in the table below, FY2027 includes total appropriations of approximately $794 million for long-term alternate bonds and CIT bonds. Due to the advance-funding requirements of various CPS bond series, a total of $666 million of operating revenues and $257 million of other revenues will be required during FY2027 for debt service during FY2027, FY2028, and FY2029.

CPS is required to set aside long-term debt service one year in advance for EBF-funded debt and one-and-a-half years in advance for PPRT and CIT bond-funded debt service. The FY2027 revenues shown in the following table for debt service 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 CIT 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 FY2027 will be paid from revenues set aside in FY2026. Table 2 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.

Future Debt Service Profile

The following graph illustrates CPS’ debt obligations on outstanding long-term bonds as of June 30, 2026. This graph does not show the impact of short-term TAN borrowings to support operating fund liquidity or any future bonds required to support future capital budgets or debt restructuring. 

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 outstanding debt 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 general obligation 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. The Board currently has no outstanding property tax-backed general obligation debt that counts toward the 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 FY2025 Annual Comprehensive Financial Report, general obligation debt per capita is $2,823. 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 policy.cps.edu.