Mayor Brandon Johnson’s new budget proposal recommends the city declare a historic surplus of funds from special taxing districts’ funds, shoring up the finances of Chicago Public Schools for the academic year.
The draft budget, unveiled Thursday, calls for the city to draw $1 billion from its tax increment financing districts, or TIFs. More than half of that money is slated for CPS, covering the $379 million the district anticipated and a controversial $175 million municipal pension payment.
The move marks a rare victory for CPS, allowing school officials to maintain their August spending plan — which relied heavily on TIF money — and spare classrooms from deeper cuts.
The pooled funds from TIF districts, taxing areas around the city, are intended for local development projects. But when the TIFs expire or are declared to have surplus, meaning there are excess funds that are not obligated to specific projects, the money is disbursed across local government bodies. CPS receives a roughly 52% cut, while the city receives 23%. This year, that amounts to a potential $522 million for the district.
Before the Chicago Board of Education passed the district’s $10.25 billion budget in late August, school officials said they had received assurances from City Council that a declared TIF surplus would allocate at least $379 million to CPS. But questions remained over whether that record surplus would actually materialize, and the district lacked a clear backup plan.
CPS also pledged that it would help the city cover the $175 million municipal pension payment for nonteaching employees, but only “contingent on additional revenue.”
The payment had become a major point of contention: While more than half of recipients of the Municipal Employees’ Annuity and Benefit Fund are district staff, up until 2020, the city footed the bill as required by state law. Johnson and former Mayor Lori Lightfoot, have since shifted the responsibility to CPS.
The political back-and-forth over the payment contributed to the resignation of the entire school board last year, and the subsequent firing of CPS CEO Pedro Martinez. Johnson’s budget proposal offers some closure to the protracted debate — at least for now. It’s unclear who will assume liability in future budget seasons.
“This commitment prevents any mid-year cuts and allows us to maintain stability in our classrooms,” Blaise said. “It also provides essential support for the pensions of CPS nonteaching personnel, the front-line staff who clean our buildings, who feed our children and support our students who have the greatest needs.”
The potential TIF revenue would also cover a canceled $8 million federal grant. The U.S. Department of Education’s Office for Civil Rights announced last month that it would withhold the mopney after CPS refused to end its Black Student Success Program, which Trump officials say violates federal antidiscrimination laws. The extra revenue helps maintain those inclusivity programs facing criticism from the government, Blaise said.
“Despite pressure from the White House, this agreement is essentially Trump-proofing the CPS budget,” Blaise said.
City Council must approve Johnson’s budget by Dec. 31. Aldermen could still object to declaring such a large TIF surplus, as the money is intended to drive redevelopment in their wards. But in August, the majority signed a letter committing to a substantial surplus to help CPS.
Educational nonprofit Kids First Chicago applauded the city Wednesday for the potential bump in funding, but also advocated for the district not to sign any intergovernmental agreement that would commit funds to Chicago before the TIF surplus amount is decided on or a budget is passed.
Mayor Brandon Johnson pitches head tax revival in 2026 budget he says targets the ‘ultra-rich’
Though the prospective funds are a win, the city’s final budget is not set in stone, the nonprofit’s chief of policy Hal Woods told the Tribune ahead of Thursday’s meeting.
“It’s going to take negotiations to see how much TIF surplus is ultimately swept. But certainly, we’re celebrating today,” Woods said Wednesday.
Some budget watchdogs, such as the Civic Federation, argue that relying on TIF surplus money is an unsustainable solution that could exacerbate the city’s structural deficit. Still, recent mayors have declared increasingly large surpluses to plug their budget gaps.
In 2014, the city declared a TIF surplus of $65 million, and CPS received $36 million. By 2025, the total surplus amount topped a record $570 million. CPS received $379 million, which accounted for 4% of its budget.
The district continues to grapple with its own fiscal woes, after years of borrowing to cover expenses and outstanding debt. CPS has about $9.1 billion in long-term debt and $450 million of short-term debt. Its bond rating is considered “junk” by three of four rating agencies, which makes borrowing more expensive. The district’s expenses will only grow as it funds the Chicago Teachers Union’s new contract, which will cost $1.5 billion over four years.
Chicago Tribune’s A.D. Quig contributed.
