Chicago Public Schools is set to receive an additional $193 million in tax revenue following the City Council's approval of a record tax increment financing (TIF) surplus. However, the infusion of cash will not translate into new resources for students or classrooms, as the funds are largely earmarked to cover pension costs and offset existing budget shortfalls.
Key Takeaways
- Chicago Public Schools will receive $552.4 million from the city's TIF surplus, which is $193 million more than initially budgeted.
- A significant portion, $175 million, will be immediately transferred back to the city to reimburse pension costs for non-teaching staff.
- The district has already implemented nearly $50 million in cuts by eliminating vacant positions and freezing central office hiring to balance its budget.
- The funding decision was part of a contentious city budget process that saw the City Council pass an alternative plan over the mayor's initial proposal.
A Windfall with a Catch
The Chicago City Council finalized its 2026 budget this past weekend, declaring a historic $1 billion surplus from the city's TIF districts. By law, Chicago Public Schools (CPS) is entitled to just over half of any declared surplus, resulting in a substantial revenue increase for the district.
The total TIF allocation for CPS now stands at $552.4 million, a figure that is $193 million higher than the $379 million the school board had anticipated when it approved its $10.2 billion budget in August. While the number appears significant on paper, the reality of its impact is far more complex.
What Are TIF Districts?
Tax Increment Financing (TIF) districts are special economic development zones created by the city. Within these zones, property tax growth is captured and set aside for public improvement projects. When these funds are not used, the city can declare a surplus, distributing the money to various government bodies, with CPS receiving the largest share.
The largest portion of this new money is already spoken for. A total of $175 million will be used as a reimbursement payment to the City of Chicago. This payment covers a portion of the pension costs for retired CPS non-teaching staff, a long-standing financial arrangement between the two government bodies. After this transfer, only about $18 million of the surplus remains for the district's discretionary use.
A District Already Making Cuts
The limited impact of the TIF surplus is compounded by the fact that CPS has been actively trimming its budget for months. The district's budget, passed over the summer, required officials to identify an additional $50 million in cuts to achieve balance.
To meet this target, the district has taken several steps to reduce spending without directly impacting classroom instruction. A district spokesperson confirmed that these measures have already been implemented.
Cost-Saving Measures
In recent weeks, CPS has focused its cuts on central administration. The district has:
- Eliminated 69 vacant positions across 19 central and citywide departments.
- Extended an ongoing hiring freeze for central office staff.
- Reduced spending on certain professional development programs for teachers.
- Made additional cuts to various central office expenses.
These administrative cuts have generated approximately $34.4 million in savings. An additional $15.6 million was saved through other efficiencies, including offering the Summer Bridge program at fewer school sites this year.
Officials have stressed that no current employees have been laid off as a result of these adjustments. They also confirmed there are no planned cuts to what they describe as "student-facing" programs for the upcoming second semester.
Mounting Financial Pressures
The need for budget discipline comes as the district faces several unexpected financial hurdles that have emerged since the school year began.
In September, the federal government cut millions in funding for magnet school grants, citing concerns with the district's diversity initiatives. This decision left an unforeseen $8 million hole in this year's budget.
Furthermore, the district is grappling with higher borrowing costs. CPS is spending an estimated $23 million more than usual on interest payments for short-term loans. These loans are routinely used to cover payroll and other expenses while the district awaits property tax revenue from Cook County, which has faced delays in its distribution process.
The Political Battle at City Hall
The TIF surplus decision was a key component of a larger, and at times tense, budget negotiation at City Hall. Mayor Brandon Johnson's initial budget proposal was voted down by the City Council in late November, leading dozens of aldermen to present an alternative plan.
Facing an end-of-year deadline, the council passed the alternative budget on Saturday with a 30-18 vote. Following the vote, Mayor Johnson announced he would neither sign nor veto the budget, allowing it to automatically go into effect at the start of 2026.
During a press conference, the mayor expressed strong opposition to certain elements of the council's plan, calling some provisions "morally bankrupt." However, he praised the final TIF surplus amount.
"We added the largest TIF surplus in the history of the city to go to our schools, our parks, our libraries," Mayor Johnson said. "These investments create spaces for our young people to grow and thrive and keep our city safe."
Despite the mayor's support for the surplus, school board members aligned with him issued a statement expressing mixed feelings. While they thanked the City Council for preserving the TIF funds for schools, they criticized the council for not supporting the mayor's proposed corporate head tax, which was intended to generate more revenue for public services.
For now, the additional funding provides a degree of stability for CPS, helping it manage pension obligations and unexpected costs. But for parents and teachers hoping for new investments in school-level resources, this financial boost will go largely unnoticed.
