The old saying goes that if something looks too good to be true, it probably is. That maxim certainly applies to the push by Chicago Public Schools and Chicago Teachers Union leadership to look to the tax increment financing program as a cure-all for their $734 million budget shortfall.
The reality is simple: Raiding TIFs will not close next year’s budget gap, and eliminating them entirely, as the union demands, would worsen the district’s long-term financial challenges.
After Gov. JB Pritzker declined to provide CPS with additional funding to cover the district’s costly contract demands, the district and the union have turned their attention to TIFs. The city’s 124 TIF districts remain an attractive target, having collected $1.2 billion by the end of 2023, with a total fund balance exceeding $3 billion as of last fall.
The narrative that ending TIFs is a financial solution is part of CTU’s broader strategy to cast the business community as yet another villain in blocking CTU leadership and Mayor Brandon Johnson from delivering on unaffordable promises. The CTU’s hope is that threatening the TIF program will prompt business interests to pressure state leaders to bail out the schools.
Despite the rhetoric, TIFs do not take money away from schools or other local governments. Tax rates for local entities, including schools, rise to meet their levy requests. In practice, TIFs don’t divert property taxes from local government; they increase them. Beyond capital improvements, TIFs provide local governments with a budget windfall that would not exist otherwise. The largest beneficiary is CPS, which receives a majority of the annual TIF surplus.
If TIFs were suddenly abolished and future TIF liabilities for any projects currently underway magically disappeared, the annual surplus TIF money the district currently receives would go away. This would offset almost nearly half of what the district would receive from the TIF abolition. The net increase to CPS would be about $340 million per year — far less than what’s needed to cover even next year’s budget deficit.
It’s fair for the City Council to ask why the city continues to provide CPS a substantial TIF windfall while also providing the schools other major subsidies. The city should direct CPS to use this windfall to pay its own pension costs for nonteacher employees, its own school construction debt and other city services the city currently pays for. This would free up almost $300 million for the city to use to balance its own budget.
CPS had billions more to spend in 2024 than it did in 2019. The district went on a COVID 19-era hiring spree, adding thousands of staff members since 2019, even as enrollment declined. Only half of the district’s $9 billion budget reaches the schools, and CPS now employs more nonteacher staff than teachers. What does the district have to show for this spending? Academic results remain deeply troubling.
There is a way out of CPS’ financial crisis, but it does not run through TIFs. The CTU contract should limit salary increases, staffing levels and other costs to available revenues. Central and regional offices and districtwide programs should be dramatically downsized. Nearly empty schools should be closed, consolidated or leased to public charter schools. Elected Local School Councils and their principals should have autonomy over their budgets and the authority to make personnel decisions and select school models that best serve their students.
Unfortunately, school leaders remain focused on protecting bureaucracy and controlling budgets and personnel, while the teachers union relies on central administration to enforce its contract and protect its monopoly. Raiding TIFs is no solution — it’s fool’s gold.
There is no substitute for effective financial management, which has been sorely lacking as CPS and CTU leaders collaborate to perpetuate the status quo.
Paul Vallas is an adviser for the Illinois Policy Institute. He ran against Brandon Johnson for Chicago mayor in 2023 and was previously budget director for the city and CEO of Chicago Public Schools.
Submit a letter, of no more than 400 words, to the editor here or email letters@chicagotribune.com.
