The budget timeline emerged as a flashpoint when the Chicago Board of Education held hearings last week in the run-up to a consequential vote Thursday on the district's $9.88 billion proposed fiscal year 2027 budget.
Chicago Public Schools budget officials warned the board that the district would be unable to make payroll in September if the board fails to pass a budget on Thursday.
That's because the district's dependence on tax anticipation notes has only grown in the wake of
The current $1.25 billion borrowing authorization for TANs will be used up in August. And without the approved budget and an approved tax levy, there won't be enough time for lenders to extend new financing, CPS officials said.
The district reported about $2.09 billion of TANs during fiscal 2026, and a negative net cash position of about $587 million at the end of the fiscal year, said Linda Vanderperre, managing director at KBRA.
"They say that they would really need around $950 million of additional cash at year's end in order to fully eliminate dependence upon TANs," she said. "This is if they maintain their current levels of expenditures."
Compounding that bind is the likelihood of another delay in receiving property tax revenue, Vanderperre said. "Cook County has informed them that their second installment is going to be delayed by about two months."
She added that while KBRA had said in an October report that CPS was likely to retain near-term market access, "right now, that continued market access is really, from an operational standpoint, it's almost indispensable. They'd better get that... It's not just financial flexibility at this point."
Vanderperre noted that from a ratings standpoint, the proposed budget includes close to $300 million of balancing measures that are not structurally balanced, but "what would elevate right now to the more immediate credit concern is probably liquidity."
KBRA rates the district's bonds BBB-minus, except for bonds with a legal opinion from the board regarding the property taxes securing them, which it rates BBB. KBRA's outlook on all the CPS bonds is negative.
In a May 4 credit opinion on the Chicago Board of Education, Moody's Ratings noted the district faced a large budget gap going into the fiscal 2027 budget process.
"Absent material changes to revenue or expenditures, the district's financial position will backslide after making significant progress in recent years," Moody's said in the opinion. "Efforts to secure additional state revenue have yet to gain traction. The governor's fiscal 2027 budget proposal would provide an incremental increase in school funding consistent with prior years, which will not alter the district's financial trajectory."
Moody's assigns CPS an issuer rating and general obligation unlimited tax debt rating of speculative-grade Ba1. The outlook is stable after a downward outlook revision in November.
The
TIF surpluses are declared by the Chicago city government when TIF districts take in more revenue than is needed to cover the costs of current or future redevelopment projects.
"This forecast, at ($732.5 million), is a lot bigger than what we were told or what they projected in October," Vanderperre said. "At that point, they were projecting about $520 million for their FY 2027 deficit."
She said the revenue adjustments in the proposed budget "are good in that they are actually now kind of getting down to structural actions as opposed to only relying on non-recurring or execution-dependent kind of actions like TIF surplus."
But to the extent that the budget relies on furloughs and freezes, and delaying those to midyear in the hopes of finding replacement revenue in the meantime, it continues to rely on uncertain revenues. "This isn't any kind of fully implemented solution here. It's kind of still contingent," Vanderperre said.
During public comments at the hearings, Chicago Teachers Union Recording Secretary Vicki Kurzydlo and others argued that Gov. JB Pritzker and state lawmakers must call a special session to "fully fund" Chicago's public schools, and one board member asked why CPS could not also assume some additional funding from Springfield in the proposed budget, as it had assumed TIF dollars.
"The prospects are long, at best, and that alone is not a sufficient basis for budgeting," said Joe Ferguson, president of the Civic Federation, a Chicago-based fiscal watchdog. "You need to have a reasonably grounded, factually based analysis for your revenue projections," which "literally does not exist anywhere" regarding the hoped-for Springfield intervention.
"In the very unlikely scenario that a special session were to be held, we'd be talking about the state amending their budget midway through the year, which would be very difficult to do without it making cuts somewhere else or generating revenue," added Daniel Vesecky, policy and research associate at the Civic Federation and the author of its
Even if a special session were to happen, Vesecky said, the more likely outcome would be for the state to provide funding for next year or the year after for CPS.
"I think it's very appropriate that they don't put anything coming from the state, over and above what the state budget already has in it, because that requires a special session or something in the veto session. And right now, there's nothing out there to suggest that anything is coming from the state," said Peter Stettler, senior director, public finance at KBRA.
"Governor Pritzker has made historic investments in Illinois public schools every year since taking office, even during challenging budget years and amid continued attacks on public education from the Trump administration," a spokesperson for the governor said by email. "Since 2019, he has increased evidence-based funding by more than $2.5 billion while investing hundreds of millions more in teacher recruitment and other supports for students and classrooms."
Regarding a special session, the spokesperson said, "As the governor has said, if there's an opportunity to provide additional resources for Illinois schools and the General Assembly can come together on a proposal that makes sense, he welcomes that conversation."
One partial reprieve that may be more realistic is the possibility Cook County would expand its interest-free bridge loan program to include CPS, which is currently ineligible.
"In terms of the terms of the bridge loan program, it makes sense that the county is offering this," said the Civic Federation's Vesecky. "That said, the program, in its current size, even if every dollar was dedicated to CPS, it would not be sufficient. And so what we're seeing here is a bit of competition between CPS and the other school districts in Cook County. If CPS is made eligible for this, its proportion of the bridge loan program would be pretty large, and then there would be a lot less money to go around."
Cook County Bureau of Finance spokesman Ted Nelson said by email there is no definitive timeline for that decision, but conversations with CPS are ongoing.
"We're in conversation with CPS to address their current cash flow needs while continuing to support the taxing districts across Cook County and their usage of the bridge fund," he said. "This approach provides for the equitable distribution of limited funds at this time."
A CPS spokesperson shared a statement by email noting that this year, CPS has received under 90% of the amount due under the last installment of property taxes. The cost of the current second-installment delay alone has hit nearly $10 million, the spokesperson said.
The district estimates delayed property tax installment payments have cost CPS over $80 million since 2020; last year, the district estimates it paid $220,000 in daily interest costs and a total of about $30 million in interest and pension penalties.
"The previously announced two-month delay of Cook County's second-installment property taxes, typically released on August 1, presents a significant, recurring financial strain for Chicago Public Schools," the spokesperson said. "Systemic delays — stemming initially from pandemic-era disruptions and more recently from a reported technology upgrade to the county's property tax system — have forced the district to rely on costly short-term borrowing to maintain daily operations."
However, the total size of the bridge loan program, $300 million, "would not come close to covering a single month's payroll for CPS," the spokesperson said.
"The public discussion about the importance of passage on July 30 is not a negotiation or a leverage position on the part of the district. It's pretty real," said the Civic Federation's Ferguson.
It's possible that if a budget doesn't pass on Thursday, "a relatively quickly called session of the board to address the differences would still allow CPS the time that's needed to actually apply for and negotiate for the TANs that are going to be needed," he said. "But there's not a lot of runway."
Ferguson noted that last year, the budget approval process dragged out into the latter part of August. This year, that would be "far too late" for CPS to manage its borrowing in a way that would allow it to meet payroll, he said.
"So for anyone who is claiming brinksmanship on the part of CPS, CPS is actually speaking about a reality," he said.
Fitch Ratings assigns the district an issuer rating and unlimited tax general obligation bond rating of BB-plus with a negative outlook, following a revision from stable in September.
S&P Global Ratings rates the district's bonds BB-plus with a stable outlook.
