Introduction to Chicago Public Schools’ Debt
CHICAGO — Chicago Public Schools’ outstanding debt is roughly the same size as its annual budget: almost $10 billion. The district owes more per student than it spends per pupil in many of its schools.
The Scope of the Debt
Among the 25 largest school districts by student enrollment, CPS has the third-most outstanding debt, according to a Chalkbeat analysis of U.S. Census Bureau data for fiscal year 2023, the most recent available. That data shows CPS owes more than $28,000 per student, up from roughly $17,000 in 2013.
Comparing Debt Burdens
The debt burden for CPS has risen in recent years as it has fallen in some other large districts. It is also one of only three districts among the 25 largest where the debt has consistently exceeded annual revenue — a sign of financial instability, experts say.
The Debate Over Borrowing
City and school district leaders are fighting over whether CPS should borrow more to cover costs. The Chicago Board of Education is slated to vote on a spending plan later this week that limits new high-cost borrowing. But pressure is mounting from Mayor Brandon Johnson and his allies on the school board, who make up a majority, to leave open the option of taking out a short-term, high-interest loan to help cover a pension payment to the city and other costs.
Not All Debt is Created Equal
Not all school district debt is created equal, experts stress: For districts with a growing enrollment and tax base, taking on debt to expand or modernize facilities makes sense. Many have voter-approved bonds that ensure a steady influx of dollars to pay off that debt.
The Consequences of Debt in Chicago
But in Chicago’s case, CPS is spending hundreds of millions in state aid meant to educate students on paying off debt instead. At the same time, enrollment is falling, and its aging buildings are expected to cost billions to maintain in the coming years — projects that could lead to even more debt.
Expert Insights
“It’s one thing to be highly leveraged when you are a growing district,” said Justin Marlowe, who leads the Center for Municipal Finance at the University of Chicago. “Sometimes, borrowing in that case is exactly the right thing to do. It’s a different story when your enrollment is flat or declining.”
Credit Rating Concerns
Credit rating agencies are watching closely. Among the nation’s 25 largest school districts, CPS is the only one that has a junk bond rating from Moody’s. That means when it does borrow, the cost to pay back lenders is higher than it can be for other borrowers.
The Impact on the Budget
The district will spend roughly $1 billion to make debt payments this school year, or $264 million more than last year, according to the CPS budget proposal. CPS will use about $395 million in state revenue meant for teacher and staff salaries, textbooks, and more to pay off debt.
Pension Liabilities
Census data analyzed by Chalkbeat does not include CPS’s unfunded pension liabilities for its teacher pension fund. This year, those liabilities grew to $13.9 billion, and the CPS budget includes a more than $1 billion payment, about a third of it covered by the state.
Finding a Way Forward
Overall, experts say the district should continue work to improve its credit ratings, find additional revenues, and confront the massive needs of its aging buildings.
The History of CPS Debt
The district’s debt burden has swelled over the past two decades. CPS has taken out bonds repeatedly to fix up aging buildings, including some it went on to close in past years and some operating at a fraction of their ideal capacity today.
Crisis Borrowing
In the mid-2010s, at a time of intense financial strain before the state overhauled how it funded public education, Chicago’s school board did what officials today call “crisis borrowing” — much of it to pay for servicing its existing debt.
Metrics for Debt Burden
Experts said debt per student is generally a more accurate reflection of debt burden. But CPS officials cite a different metric of $2,970 in debt per Chicago resident. It has also steadily risen, but officials say it remains only slightly above the national average.
National Context
Census data shows that the total amount of debt districts across the country has risen steadily and is more than double what it was two decades earlier. Still, experts said the national housing boom and the growth in the property tax base helped stabilize many school districts’ and cities’ budgets since the Great Recession — but not in Chicago.
Good and Bad Debt
This summer, Chicago school district officials put forward plans to issue $600 million in new debt for capital expenses. They also spelled out plans to refinance debt from that “crisis borrowing” a decade ago in order to realize about $129 million in savings.
Prioritizing Critical Repairs
District officials say nearly $200 million of this year’s $1 billion debt service expenditures will go specifically to cover costs incurred during crisis borrowing in the mid-2010s. That could pay for at least 2,000 additional teachers instead.
State Role in School Funding
Some think the state should play a larger role in covering the cost of maintaining and updating school buildings. Mary Filardo, executive director of the 21st Century School Fund, pointed out that while Illinois only covered a small portion of districts’ capital expenses.
Conclusion
The debt crisis facing Chicago Public Schools is complex and multifaceted, with no easy solutions. However, experts agree that the district must prioritize sound fiscal decisions, improve its credit rating, and find ways to address the massive needs of its aging buildings. By doing so, CPS can reduce its debt burden and free up more resources to serve its students.
FAQs
- Q: How much debt does Chicago Public Schools owe per student?
A: According to the latest data, CPS owes more than $28,000 per student. - Q: How does CPS’ debt compare to other large school districts?
A: Among the 25 largest school districts, CPS has the third-most outstanding debt. - Q: What are the consequences of CPS’ high debt burden?
A: The high debt burden means that CPS is spending hundreds of millions in state aid meant to educate students on paying off debt instead, and it may lead to even more debt in the future. - Q: What can be done to address CPS’ debt crisis?
A: Experts recommend that the district prioritize sound fiscal decisions, improve its credit rating, and find ways to address the massive needs of its aging buildings.
