City's record $300 million proposal for CPS budget deficit would still leave shortfall

Chicago Public Schools could receive about $300 million to help fill its budget deficit after Mayor Brandon Johnson on Wednesday proposed a record tax increment financing surplus for a second consecutive year. But that’s far less than what schools CEO Pedro Martinez requested, and the city says the school district is still on the hook for a $175 million pension payment.

The hefty sum from the city would be unprecedented but doesn’t resolve the public dispute between Johnson and Martinez that led to upheaval at the Board of Education because it doesn’t answer all questions over CPS’ upcoming expenses.

For this year, the district’s funding gap would be cut in half, leaving CPS with about $185 million in expected costs it can’t currently afford.

Tax increment financing is a funding tool that uses property taxes to spur local development in specific geographic areas around the city. The mayor and the Budget Department can use unspent or unobligated money from the city’s many TIF districts as a one-time fix to balance the city’s budget. That’s called declaring a TIF surplus. CPS gets 52% of that cash.

To settle CPS’ budget hole, Martinez asked Johnson for $484 million in TIF funds this year, a request that was always unlikely because it would have required declaring a more than a $900 million total surplus. That would be politically challenging since City Council members rely on that money to attract development to their wards.

Instead, in the city budget proposal Johnson unveiled Wednesday, the mayor declared a still-unprecedented $570 million TIF surplus, giving CPS around $300 million plus another $11 million to support building improvements. CPS was already counting on getting $160 million in TIF dollars.

The new TIF dollars would put Martinez about halfway toward covering some key expenses left out of the CPS budget passed in July.

That hole includes an estimated $150 million for contracts with the Chicago Teachers Union and a new principals union that are being negotiated now. And there’s a $175 million pension payment for non-teacher CPS staff that Johnson has insisted the district make but Martinez has refused, saying he needs city funding for it. The Board of Education hasn’t approved that payment.

Martinez’s $485 million TIF request — including the $160 million CPS was already banking on — would have covered those two obligations.

But with only a $300 million surplus, the CPS hole is down to $185 million

CPS will have to keep advocating for funding solutions from Springfield lawmakers. Otherwise Johnson’s new Board of Education, which is set for its first full meeting Friday, might have to consider an unpopular option Martinez and the previous board rejected: a loan to cover the remaining amount.

But Martinez suggested to the City Council that he could find efficiencies to reduce spending. He promised that these would not be mid-year cuts to school staff, which Johnson has rejected.

The mayor’s office also said it’s counting on CPS to make the disputed pension payment this year and for the two years after that, setting up future battles if no solution is found for CPS’ funding shortfall long term.