Chicago Public Schools could pass a $10 billion budget July 30. How have its finances become such a mess?

The CPS budget proposal relies on hundreds of millions in fund sweeps to “balance.” Despite layoffs, CPS payrolls grew compared with last year and remain 8,250 higher than 2020 levels despite fewer students.

As the Chicago Board of Education prepares to pass a schools budget as soon as today, attention has focused on a big projected deficit and not on how district finances devolved into massive, recurring shortfalls.

How is CPS going to close the 2027 deficit?

Despite record-high revenues, the district began its budgeting process for fiscal 2027 with a projected $732.5 million deficit as growth in expenses continue to outpace revenues.

Pressure from the Chicago Teacher’s Union has already led to several last-minute changes in CPS’ nearly $10 billion budget proposal, increasing costs for the district. Regardless of the final budget, the negotiations show that shortfalls will likely be a recurring challenge for CPS as long as expenditure and staffing trends continue to run opposite of enrollment trends.

The district has proposed closing the deficit for fiscal 2027 via:

• $185 million in additional revenues from tax increment financing district surpluses.
• $177 million in reductions to spending and savings at central office/citywide budgets, including layoffs.
• $163 million in cost savings associated with changes to school funding, including teacher layoffs.
• $113 million in savings from districtwide mid-year spending and hiring freezes with other procurement initiatives.
• $111 million in projected additional revenue from state funding, Medicaid reimbursement and healthcare rebates.

The anticipated TIF revenue relies on the city of Chicago declaring surplus TIF money in its budget, which will not be determined until late this fall. In other words, this additional revenue is purely speculative.

The district is also assuming that an additional $111 million from state funding, Medicaid reimbursement and healthcare rebates will be made available. Meanwhile, a proposed mid-year spending and hiring freeze beginning in January are expected to save the district $113 million.

Additional cost savings come from the “layoff” of nearly 1,500 employees, but laid-off employees have historically found new positions within the district. While some positions will see year-over-year decreases in full-time-equivalent employees, total CPS staff will increase by 746 from 2026 to 2027, largely due to the district bringing custodial staff on payrolls rather than contracting out those services.

Since 2020, total CPS staffing has increased by 8,250 positions, with substantial additions to citywide student support staff, school support staff and teachers.

How did CPS get to this point?

Years of financial mismanagement culminated in a nearly $1.2 billion initial budget deficit in 2016. The district’s financial crisis coincided with major policy changes in 2017, such as the state’s adoption of evidence-based funding, the state beginning to pay the “normal costs” for the district’s teacher pensions and the district reinstating a dedicated property tax levy to pay for the remainder of their teacher pension costs.

These measures largely served to reduce the district’s projected budget deficits in the years immediately following, though structural issues persisted as anticipated expenditure growth continued to outpace actual revenue growth.

Finances temporarily improved even more when the district was awarded $2.8 billion in additional federal pandemic relief funds, which it deployed from 2020 to 2025 to buoy district finances and eliminate initial projected deficits from 2022 to 2024.

With billions in temporary federal aid, CPS was able to avoid projected shortfalls until 2025, when the district spent the final $233 million in pandemic-related aid. In 2025, CPS faced an initial $505 million budget deficit, which it had to reconcile through reductions in department budgets, a central office hiring freeze and debt restructuring, among other actions.

In 2026, the district faced a $734 million budget deficit, which it closed via higher-than-expected revenues from tax increment financing surpluses, city of Chicago contributions for employee pensions, reductions in anticipated department budgets, among additional revenue-increasing and cost-saving measures.

Is the crisis over?

Because these were one-time fixes or temporary changes, the district’s budget deficits persist. CPS is now  grappling with a $732.5 million shortfall as spending on salaries and benefits continues to increase despite a smaller student population than in the past.

Since 2020, CPS  enrollment has declined by more than 24,000 students, or 7%. However, annual operating expenses have climbed by $2.4 billion, or 39%. The vast majority of that increase has gone to salaries and benefits associated with higher payrolls.

The tremendous growth in staffing in recent years driving CPS’ financial distress is unsustainable, particularly as enrollment has continued to decline and more than 1-in-3 desks across the district sits empty.

Returning staffing to 2020 levels would save the district more than $1 billion annually. Making matters worse, 58% of CPS schools are underutilized, meaning that enrollment is less than 70% of capacity. This underutilization means not only has there been exorbitant staffing growth relative to enrollment, but maintenance and operating costs are bloated as most schools sit half-empty.

Despite the district’s financial hardships and inefficiencies, CTU leadership ratified a new contract with CPS in 2025, estimated to add $1.5 billion to district expenses over four years. Among the provisions is the addition of more staff, exacerbating the district’s financial woes.