Chicago Public Schools is preparing to approve a nearly $10 billion budget today while facing a projected $732.5 million deficit for fiscal year 2027, despite receiving record-high revenues, according to a report published July 30 by the Illinois Policy Institute. The district's financial crisis stems from years of spending growth that has far outpaced both revenue increases and student enrollment, with operating costs climbing by $2.4 billion, or 39%, since 2020 even as enrollment dropped by more than 24,000 students during the same period. The district's proposed budget relies heavily on fund transfers, hiring freezes, and speculative revenue sources to close the gap.
The district plans to eliminate the deficit through five main strategies: $185 million in extra revenue from tax increment financing district surpluses, $177 million in reductions to central office budgets including layoffs, $163 million in cost savings from changes to school funding that include teacher layoffs, $113 million from a districtwide mid-year spending and hiring freeze starting in January, and $111 million in projected additional revenue from state funding, Medicaid reimbursement, and healthcare rebates. Despite the proposed layoffs of nearly 1,500 employees, total CPS staff will actually increase by 746 positions from 2026 to 2027, primarily because the district is bringing custodial workers onto payrolls rather than contracting out those services. Since 2020, overall staffing has grown by 8,250 positions across student support, school support, and teaching roles. More than 1-in-3 desks across the district now sit empty, and 58% of CPS schools are underutilized, meaning enrollment is below 70% of capacity.
The report finds that the anticipated TIF revenue depends entirely on the city of Chicago declaring surplus TIF money in its budget, which won't be determined until late fall, making this additional revenue "purely speculative." The authors note that laid-off employees have historically found new positions within the district, raising questions about whether the proposed workforce reductions will generate real savings. According to the report, "the tremendous growth in staffing in recent years driving CPS' financial distress is unsustainable, particularly as enrollment has continued to decline," and returning staffing to 2020 levels would save the district more than $1 billion annually.
The district's current financial troubles trace back to years of structural mismanagement that produced a nearly $1.2 billion initial budget deficit in 2016, followed by temporary relief from $2.8 billion in federal pandemic funds deployed between 2020 and 2025. Once that aid ran out, the underlying problems resurfaced: CPS faced a $505 million deficit in 2025 and a $734 million deficit in 2026, both closed through one-time fixes like TIF surpluses, city pension contributions, and debt restructuring. The report explains that these temporary measures haven't addressed the core issue—salaries and benefits tied to higher payrolls continue to rise while the student population shrinks. Making matters worse, the Chicago Teachers Union ratified a new contract in 2025 estimated to add $1.5 billion to district expenses over four years, including provisions for additional staff.
Because the district continues to rely on short-term fixes rather than structural reforms, the report concludes that budget shortfalls will remain a recurring challenge as long as spending and staffing trends move opposite to enrollment trends. With most schools sitting half-empty and maintenance costs bloated by underutilization, the district faces both immediate fiscal pressure and long-term inefficiency. The negotiations over this year's budget show that pressure from the teachers union will likely keep pushing costs higher even as fewer students fill the classrooms.