Revenue

Chicago Public Schools’ finances, like those of districts across the country, have been impacted by the COVID-19 pandemic. With the American Rescue Plan becoming law in March 2021, approximately $1.8 billion was directed to CPS with the third round of ESSER funding (ESSER III). This provided the necessary revenue to combat the effects of the pandemic on learning loss and the social and emotional well-being of students, safely open schools, and support priority investments. The District projects to have $233 million available for FY2025, expiring September 2024. This constitutes a reduction of $437 million in ESSER III revenue relative to FY2024 and is the most significant revenue impact on CPS’ FY2025 budget.

The largest share of local revenue comes from the Chicago Board of Education’s ability to tax residents on the value of their property. The stability of this revenue source is vital to the financial health and viability of the District. CPS’ ability to extend taxes is governed by the Property Tax Extension Limitation Law (PTELL) that limits the amount CPS can increase its property tax levy by the lesser of the change in the Consumer Price Index (CPI) or five percent. For FY2025, the relevant CPI has been calculated at 3.4 percent.

The largest portion of state funding allocated to CPS and other Illinois districts is Evidence-Based Funding (EBF). The state’s EBF model allocates each year’s new funding through a tiering system that directs new investments in state education funding to districts most in need of resources. At the end of the recent state legislative session, the General Assembly passed a state budget that includes a $350 million increase in EBF funding. As an under-resourced district, CPS will see additional state funding in FY2025, and, due to the EBF distribution construct, the additional amount will become the base for CPS’ appropriation in FY2026.

The federal government’s response to the pandemic through the passage of ESSER I, II, and III has allocated a historic level of federal funding to CPS. This one-time revenue has been budgeted to combat the effects of the pandemic on student achievement and well-being––and offset lost revenue and increased costs resulting from the pandemic. The federal aid packages have resulted in allocations totaling $2.8 billion over five fiscal years beginning in FY2020. Without this financial relief, it would not have been possible to make critical investments in schools and school staff, manage the costs incurred from meeting the technological needs of remote instruction, and ensure school buildings were equipped to welcome back students and educators safely.

The following section details the factors, assumptions, and trends that are the basis of the FY2025 revenue budget.

Local Revenues

Property Taxes

CPS is projected to receive $4,009 million in property tax revenues in FY2025, which remains the District’s largest single revenue source. A portion of the District’s property tax revenues are restricted for specific uses. Within the operating budget, CPS projects to receive $559 million from the dedicated Chicago Teacher Pension Fund (CTPF) levy, which assists CPS in paying its annual pension obligation. (For more information on the pension levy calculation, please review the Pensions chapter). $85.2 million is revenue from the Capital Improvement Tax levy, which includes $79.7 million dedicated to paying debt service on bonds issued for capital improvements and $5.5 million in additional levy receipts.

The remaining $3,365 million of CPS’ property taxes are free to fund any other operating costs. $3,212 million of this is from the CPS property tax education levy, and $121 million is revenue from Transit Tax Increment Financing (TIF). CPS expects another $32 million from changes to the property tax code from Public Act 102-0519, which allows Illinois school districts to receive the amount of property tax levied but not received due to property tax bill refunds processed through the State Treasurer’s Office.

The FY2025 budget includes a net increase in property taxes of $193 million. The increase is attributable to an increase of $10.2 million from the District’s Transit TIF collections and $21.1 million is attributable to increased Capital Improvement Tax collections. Pension levy collections are expected to be $1.6 million higher relative to the FY2024 budget; this relatively small increase is due to lower-than-expected growth in the equalized assessed value of property in the City of Chicago. The remaining change can be attributed to the impact of inflation as well as the impact of assessments, new property, and expiring TIF districts on the Education levy.

Impact of Inflation

CPS’ property tax levy is subject to PTELL, which limits the amount school districts can extend or collect from a taxing district. Each year, CPS levies property taxes to fund the operations of the public school system. The amount that CPS requests through the Board of Education cannot reflect an increase greater than the lesser of the change in the Consumer Price Index (CPI) or five percent. Tying tax increases to CPI is intended to prevent taxpayers from being overburdened by government activity that is irrespective of larger economic trends and has a subsequent impact on taxpayers.

The Illinois Department of Revenue is responsible for publishing the CPI that will be used for any government unit subject to PTELL. For the FY2025 property tax levy calculation, the calculated CPI is 3.4 percent. Inflationary increases under PTELL impact only the District’s education levy and are expected to add $79 million to the District’s projected property tax collections.

Impact of Assessments and New Property

The Cook County Assessor’s office reassesses property values on a triennial cycle. The City underwent its regular reassessment in 2024. However, forecasting the impact of the reassessment is challenging. This is not only because of the off-cycle COVID-19 reassessment performed by the Cook County Assessor’s Office in 2020, but also because Assessor Kaegi’s office has publicly shared that assessments prior to Kaegi taking office have been historically inaccurate. These assessments were not equitably or fairly distributing the tax burden to different neighborhoods and communities throughout the County, specifically throughout Chicago. The FY2025 budget includes an estimated year-over-year equalized assessed value (the property value measure used in property tax levies) growth of eight percent, the projected rate of growth expected in an assessment year.

Additionally, property that was either constructed during a given tax year, or newly taxable as part of the incremental value of an expired TIF district, is not included in the base property amount that is capped under PTELL. Both new property and the incremental equalized assessed value (EAV) of an expiring TIF district are taxed at the same rate as existing properties.

In tax year 2024, an anticipated amount of $609 million of newly constructed property and $2,133 million of incremental TIF EAV is projected to be newly available under CPS’ tax levies and will subsequently become part of the 2025 tax base. Changes due to assessments, new property, and expiring TIF districts are expected to add $81 million to the District’s projected property tax collections.

Other Property Tax Considerations

A smaller portion of CPS operating revenues is generated by the TIF district created for the Red-Purple Modernization Program (Transit TIF) on the North Side of Chicago to modernize Chicago Transit Authority (CTA) tracks from North Avenue to Devon Avenue. By statute, CPS is due approximately 52 percent of all incremental value produced in the Transit TIF. In FY2025, CPS projects that Transit TIF revenues are budgeted to be $121 million, representing an increase of just over $10 million from the FY2024 revenue budget of $111 million.

Personal Property Replacement Taxes (PPRT)

Personal Property Replacement Taxes (PPRT) are collected by the State of Illinois and distributed to local governments state-wide. While the tax rates behind the collections are constant, the amount of funding CPS receives from this revenue can vary significantly from year to year. This is because PPRT is a tax that businesses and partnerships, trusts, and S corporations pay on their net Illinois income, along with a tax that public utilities pay on invested income. As corporate and investment income fluctuates, so does the amount received by local government agencies, including CPS.

The collection rates, found below, are greatest for the Corporate Income Tax  (CIT) and are therefore used to provide the basis of the CPS revenue budget.

• Corporations pay a 2.5 percent replacement tax on their net Illinois income.
• Partnerships, trusts, and S corporations pay a 1.5 percent replacement tax on their net Illinois income.
• Public utilities pay a 0.8 percent tax on invested capital.

Prior to the late 1970s, local governments and school districts were statutorily allowed to levy taxes on business properties. After the General Assembly revoked that ability, legislation instituting PPRT was passed to mitigate the revenue loss to local taxing agencies. The portion of PPRT disbursed to Illinois local government agencies reflects the amount collected in tax year 1977. For CPS, the portion of collected PPRT distributed is 14 percent.

Due to economic factors and the impact of pass-through entity tax legislation, PA 102-0658, PPRT underperformed FY2024 expectations with an end-of-year total of $384 million in CPS revenue, approximately $196 million less than the FY2024 budgeted total of $579 million. In FY2025, PPRT receipts are budgeted to be similar to projected FY2024 revenue. CPS projects to collect $375 million in PPRT revenue in FY2025. With debt service payments from PPRT totaling $40 million, the remaining $335 million of PPRT revenue will be available to support operating costs.

PPRT projections are based on an anticipated 2.7 percent growth in national corporate profits before tax using historical data provided by the Federal Reserve. This anticipated increase in revenue generated by the State is adjusted by a projected increase in the rate at which the State’s annual true-up adjustments of overall business income tax revenues move funds from the State PPRT Fund to other funds holding revenues associated with state income taxes.

TIF Surplus and Other Local Resources

State law requires that surplus TIF district property tax revenue is proportionally distributed to the taxing bodies within the TIF districts. CPS expects to receive $159 million in TIF surplus funding in FY2025. CPS’ share of TIF surplus funding will be finalized once the City of Chicago passes its budget in the fall.

All other local revenue includes a variety of other revenue sources, including school-generated revenue, payments from charter schools, and revenue generated through intergovernmental agreements (IGAs), including $142 million from an annual City property tax levy that funds the debt service on CPS issued bonds through the District’s School Building and Improvement IGA.

Local Contributions to Capital

FY2025 local capital revenue of $59.5 million assumes $44 million in reimbursements for ongoing TIF-related projects, plus $10 million from the Metropolitan Water Reclamation District and the Department of Water for Space to Grow projects. The budget also includes $5.5 million from Capital Improvement Tax collections not tied to existing bond issuances.

State Revenue

In FY2025, CPS’ state revenue budget is $2,625.1 million, which comprises 28.1 percent of CPS’ total budget. As discussed above, the state provides funding to CPS through EBF, support for pension normal cost, and several other appropriations that come in the form of reimbursable or block grants.

Evidence-Based Funding

EBF is the largest portion of funding that CPS receives from the State of Illinois. In FY2025, EBF represents 67.0 percent of the $2,625.1 million that CPS is projected to receive from the state.

Since its inception in 2017, the state has allocated EBF funds to districts using a formula that maintains existing funding levels for all districts and targets new funding to the districts that are least well-funded. The formula first allocates each district its Base Funding Minimum, a total reflecting the previous year’s EBF allocation. This provision provides crucial stability for CPS as it ensures that, regardless of enrollment or demographic trends, CPS will receive at least the same funding as the year prior, absent the state taking an unprecedented and highly unlikely step of disinvesting from EBF funding.

The second component of the formula allocates new, or “tier,” funding based on a formula that targets the least well-funded districts. To evaluate funding levels of districts across the state, the state first calculates “adequacy targets” for each district, reflecting the evidence-based level of resources needed for each district to educate its students. Adequacy targets include, for example, the additional resources necessary to educate low-income students, special education students, and English language learners, along with the financial resources needed to provide funding for technological devices and instructional materials.

Funding adequacy, expressed as a percentage, is then calculated by dividing each district’s available local resources by its adequacy target, indicating each district’s ability to meet its specific needs. The FY2024 calculations, the most recent calculations currently available, indicate that CPS’ funding adequacy is 80.6 percent.

Tier funding is then distributed using a formula that allocates the most funding to “Tier 1” schools, or those least adequately funded. Until FY2023, CPS had been a Tier 1 district since the inception of EBF, reflecting the high needs of the District and historical levels of underfunding. Due primarily to short-term changes to revenue and expense factors within the EBF formula, CPS fell to Tier 2 in FY2023. At the time of publication, the Illinois State Board of Education (ISBE) has not publicly shared updated tier designations, but CPS anticipates remaining in Tier 2 for FY2025. Based on this designation and the $350 million of new EBF funding in the state’s recently passed FY2025 budget, CPS expects to receive an additional $23 million in tier funding in FY2025, less than seven percent of the total new funding.

Since 2019, CPS has received an additional allocation of EBF funding that is the result of property tax adjustments. This amount totals just over $16 million and is included in the total EBF funding amounts.

State Contribution to Teacher Pensions

FY2025 is the eighth consecutive year that CPS has benefited from the State of Illinois making payments to the Chicago Teacher Pension Fund (CTPF). While the state contributions help to offset the impact that CTPF has on CPS’ financial health, Chicago remains the only district in Illinois that is required to pay contributions to its teacher pension fund. In FY2025, the state contribution to CTPF is $353.9 million, an increase of $31 million from the prior year’s contribution of $322.7 million, but only 35 percent of the District’s total teacher pension cost.  See the Pensions chapter for more information.

Additional State Funds including Categorical Grants

In addition to EBF and teacher pension contributions, CPS is projected to receive $488 million in revenue from other state-appropriated funds and categorical grants. The majority of this funding is from the Early Childhood Block Grant, which increased from $249 million in FY2024 to an estimated $284 million in FY2025. CPS also expects to receive $12 million for teacher pipeline efforts as part of a new appropriation in the state's recently passed budget.

State Contribution for Capital

The state capital revenue total of $28.3 million comprises $13.3 million in gaming revenue for new construction projects and $15 million in anticipated reimbursements for approved capital projects.

Federal Revenue

Most federal grants require the Chicago Board of Education to provide supplemental educational services for children from low-income households, children from non-English speaking families, and neglected and delinquent children from pre-k through 12th grade. These grants are dedicated to specific purposes and cannot supplant local programs. Medicaid reimbursement and Impact Aid are the only federal funding sources without any restrictions.

Every Student Succeeds Act (ESSA)

• Title I-A—Low Income: Allocated based on a district’s poverty levels, this is the largest grant received under the ESSA. The grant allows the District to provide supplemental programs to improve the academic achievement of low-income students. The anticipated total grant award for FY2025 is $389.5 million, which includes an allowable carryover of $94.0 million from the previous year.
• Title I-A—School and District Improvement (formerly IL Empower): This grant is a state-wide system of differentiated support and accountability to improve student learning, purposely designed to develop capacity to meet student needs. CPS anticipates a grant award of $11.7 million in FY2025.
• Title I-D—Neglected/Delinquent: This grant targets the educational services for neglected or delinquent children and youth in local and state institutions to assist them in attaining state academic achievement standards. Programs include academic tutoring, counseling, and other curricular activities. The anticipated total grant award for FY2025 is $2.1 million.
• Title II-A—Improving Teacher Quality: This grant funds class size reduction, recruitment and training, mentoring, and other support services to improve teacher quality. CPS anticipates a total of $32 million to be awarded for the FY2025 Title II-A grant, which includes a current award of $20 million and an estimated $12 million in carryover from the previous year.
• Title III-A—Language Acquisition: These funds support students with limited English proficiency who meet eligibility requirements. The total funding available is estimated at $9.3 million for FY2025.
• Title IV-A—Student Support and Academic Enrichment Grants: These grants support states, local educational agencies, schools, and local communities to provide all students with access to a well-rounded education, improved student learning conditions in schools, and increased technology in order to improve the academic achievement and digital literacy of all students. CPS anticipates a total of $39.6 million to be awarded for the FY2025 Title IV-A grant, which includes a carryover of $19.4 million from the previous year.
• Title IV-B—21st Century Community Learning Centers: These grants provide opportunities for communities to establish schools as community learning centers and provide activities during after-school and evening hours. CPS anticipates a total of $9.6 million to be awarded in FY2025, a decrease of $2.5 million from the previous year.
  

Individuals with Disabilities Education Act (IDEA)

IDEA grants are allocated based on a state-established formula to provide supplemental funds for special education and related services to all children with disabilities from ages three through 21.

The IDEA grants include a number of programs:

• IDEA Part B Flow-Through: This is the largest IDEA grant, with the estimated award for FY2025 totaling $102.0 million.
• IDEA Room and Board: This grant provides room and board reimbursement for students attending facilities outside of Chicago and is estimated at $6.7 million in FY2025.
• Part B Preschool: This grant offers both formula and competitive grants for special education programs for children ages 3–5 with disabilities. CPS is expected to stay level at $1.4 million from the formula grant and $447,196 from a competitive grant for FY2025.

Total FY2025 IDEA funding equals $110.5 million, including small competitive grants and carryover from the previous year in the preschool grant.

Child Nutrition Programs

CPS participates in state- and federally-funded Child Nutrition Programs, including the:

• School Breakfast Program (SBP)
• National School Lunch Program (NSLP)
• Child and Adult Care Food Program (CACFP)
• Summer Food Service Program (SFSP)
• Fresh Fruit and Vegetable Program (FFVP)

Under the Child Nutrition Programs (CNP), CPS offers free breakfast, lunch, after-school supper, after-school snacks, Saturday breakfast, and Saturday lunch during the school year. The District also serves breakfast and lunch during summer school and offers fresh fruit and vegetables to elementary school students during the school year.

In 2012, CPS began participating in the Community Eligibility Provision program. All schools are now part of this program, which provides free breakfast and lunch to all students regardless of income eligibility. CPS is reimbursed for all meals at the maximum free reimbursement rate under each CNP.

CPS anticipates $211 million in federal reimbursements for FY2025. These revenues include:

• $195 million for school lunches, breakfast, snacks, and donated foods
• $13.5 million for CACFP
• $2.6 million for FFVP

Medicaid Reimbursement

Local Education Agencies (LEAs) are required to provide special education and related services as delineated in the Individualized Education Program (IEP) or Individualized Family Service Plan (IFSP) at no cost to parents. In addition, LEAs in Illinois may now seek reimbursement for Medicaid-eligible services provided by Medicaid-eligible providers to any Medicaid-enrolled student. Medicaid provides reimbursement for the:

• Delivery of covered direct medical services provided to any Medicaid-enrolled child
• Cost of specific administrative activities, including outreach activities designed to ensure that students have access to Medicaid-covered programs and services.

Medicaid provides reimbursement for covered direct medical services including, but not limited to: audiology, developmental assessments, medical equipment, medical services, medical supplies, medication administration, nursing services, occupational therapy, physical therapy, psychological services, school health aides, social work, speech/language pathology, and specialized transportation. When these services are provided to a Medicaid-enrolled student, the services are eligible for Medicaid reimbursement at the state’s reimbursement rate, approximately half of the established cost to provide the service.

Medicaid revenues in FY2025 are projected to be $100.0 million, subject to the level of healthcare services rendered in the upcoming school year. FY2025 Medicaid revenues are strengthened by recent changes in state policy expanding eligible services and providers, continued revenue retention initiatives focused on enrolling eligible students in Medicaid, improving service capture, maximizing claiming and billing processes, and ensuring all claimable costs are reimbursed.

Other Federal Grants

This category includes funding for other specific purposes, including:

• Carl D. Perkins: This grant was established to help students in secondary and post-secondary education develop academic and technical skills for career opportunities, specific job training, and occupational retraining. The FY2025 Perkins formula grant is anticipated to be $7.5 million.
• E-rate: The Federal Communications Commission provides funding through its E-rate program to discount the cost of telecommunications, internet access, and internal connections for schools and libraries across the country. The FY2025 federal E-rate grant is anticipated to be $8.8 million.

Elementary and Secondary School Emergency Relief Funding

In response to the COVID-19 pandemic and its subsequent impact on school districts throughout the country, the federal government has taken steps to support new pandemic-related costs and provide funding relief for impacted revenues through three rounds of emergency funding.

The first round of Elementary and Secondary School Emergency Relief funding (ESSER I) was allocated to school districts through the Coronavirus Aid, Relief, and Economic Security (CARES) Act, passed by Congress in March 2020. CPS received $206 million in ESSER I funding that was used to support costs in the FY2020 and FY2021 budgets, allowing the District to support emergency remote learning and school reopening costs required by the onset of the pandemic.

Congress passed the second round of relief funding (ESSER II) in December 2020, which generated $794 million for CPS over the course of FY2021 and FY2022. 

The final, most significant round of federal funding came in March 2021 with the American Rescue Plan, within which a third round of ESSER funding (ESSER III) directed approximately $1.8 billion to CPS. This funding will be available through September 2024 and, similar to ESSERs I and II, provides the necessary funding to combat the effects of the pandemic on learning loss and the social and emotional well-being of students, safely open schools, and support priority investments.

The District projects to have $233 million in ESSER III funding slated for FY2025. This funding is helping the district reduce the overall budget deficit for FY2025 and will provide revenue to support FY2025 school funding.

Federal Interest Subsidy under Qualified School Construction Bonds (QSCBs) and Build America Bonds (BABs)

In FY2025, CPS has budgeted to receive a direct federal subsidy payment of $24 million for these two types of federally subsidized bonds. This amount takes into consideration an allowance assumption of 5.7 percent for federal sequestration. See the Debt Management chapter for more information.

Federal Contribution for Capital

The federal capital revenue total of $3.8 million is funded by the federal E-Rate grant.