Chicago school board passes $10 billion-plus 25-26 budget

The Chicago Board of Education approved a $10.26 billion fiscal year 2026 budget on Thursday, leaving the administration of Mayor Brandon Johnson and the City Council to pay for a disputed Municipal Employees’ Annuity and Benefit Fund pension payment.

“Chicago Public Schools is hopeful that passing the balanced FY26 budget will demonstrate to investors and rating agencies another step toward its multi-year trend of fiscal stability,” spokesperson Mary Ann Fergus said by email.

“The final district budget allows us to build on the academic momentum of the past few years,” Interim Superintendent and CEO Dr. Macquline King said in a statement on the eve of the vote. “This is about protecting students, their future, and the district’s long-term financial health.”

S&P Global Ratings said the budget that passed is “fiscally responsible.”

Ying Huang, a director for S&P’s public finance ratings division, praised the district’s decision not to take out a short-term loan to cover the costs of the pension payment, as the Johnson administration had urged it to do.

The MEABF, a city pension fund, covers most non-teaching Chicago Public School employees.

“We believe taking on a high interest, short-term loan would increase CPS’ debt burden and long-term costs, and we don’t view it as a structural measure to balance the budget,” Huang said. 

S&P rates the district BB-plus with a stable outlook.

“Although the MEABF contributions are not a legal responsibility for the board, we expect they will remain an uncertainty for CPS’ future budgets and could create additional budgetary stress if they are transitioned to the board without corresponding revenue increases,” she added. 

With the exception of three years earlier in this decade, the city government has historically covered the MEABF payments for CPS workers, according to the Civic Federation.

Some aldermen had threatened that the city might be less generous with CPS if the district did not pay the MEABF pension costs. But one major source of support the district receives from the city, tax increment financing surplus, is determined by state law: if the city declares a TIF surplus, it must be distributed to local political subdivisions like CPS according to their share of total property tax levies. 

Huang said that if the amount of TIF surplus drops significantly, it would create budgetary pressure for CPS. But she noted that according to the property tax distribution formula, about 52% of the TIF surplus has to go to CPS and 23% goes to the city.

“In our view, similar to fiscal 2025, the city’s own sizable budget gap in fiscal 2026 creates the motivation to declare surpluses sufficient to balance its own budget, directly benefitting CPS’ revenues,” she said.

The final budget closed a $734 million deficit and avoided mid-year cuts to schools.

It includes $320 million in savings from central office department and operational cuts; $45 million in evidence-based funding from the state; the repurposing of $65 million from the debt service stabilization fund; a $25 million donation from MacKenzie Scott; and a $79 million increase in TIF revenue over fiscal 2025’s number.

District spokespeople did not respond by press time to questions about plans for a bond sale next week to fund capital projects that the district disclosed on the Municipal Securities Rulemaking Board’s EMMA website.

The agenda review committee meets next Wednesday, and the full board meets Sept. 25.

The Chicago Board of Education is rated BB-plus by Fitch Ratings. The outlook is stable. Moody’s Ratings rates the district Ba1 with a positive outlook. KBRA assigns a BBB rating (except the 2016 to 2019 GO bonds, which it rates BBB-plus); the outlook is negative.