CHICAGO PUBLIC SCHOOLS Chicago Board of Education Chicago, Illinois COMPREHENSIVE ANNUAL FINANCIAL REPORT For the year ended June 30, 2015 Prepared by the Department of Finance Rahm Emanuel, Mayor, City of Chicago Frank Clark, Board President Forrest Claypool, Chief Executive Officer Board of Education CITY OF CHICAGO Office of the Board 1 North Dearborn Street, Suite 950, Chicago, Illinois 60602 FRANK M. CLARK Telephone (773) 553-1600 JESSE H. RUIZ PRESIDENT Fax (773) 553-3453 VICE PRESIDENT MEMBERS MARK F. FURLONG REV. MICHAEL J. GARANZINI, S.J. DR. MAHALIA A. HINES DOMINIQUE JORDAN TURNER GAIL D. WARD December 16, 2015 Dear Stakeholders, We are pleased to present to you the Chicago Public Schools (CPS) fiscal year 2015 financial results. CPS is facing financial crisis. The budget prepared for the General Operating Fund for the fiscal year that ended June 30, 2015 had a deficit gap of $862 million and a structural deficit of $1.1 billion in the Operating Fund. The consistent decline in state education funding, along with an inequitable pension system and rising pension costs, compounded by increasing capital needs, has pushed our District to a financial breaking point. To try and keep cuts away from the classroom, we have reduced our administrative and operating costs over the past several years, and we will continue streamlining our central bureaucracy to achieve maximum efficiency. Despite our financial problems, our students continue to make academic progress, proving why it’s so important that we find a solution and continue to invest in our classrooms. According to the National Assessment for Educational Progress (NAEP), which is often referred to as the nation’s report card, CPS students are outpacing their peers nationally in academic growth, with our eighth-graders achieving the best progress in Math growth of any large urban school district in the country. Attendance and graduation rates are on the rise, and CPS students recently recorded the highest composite ACT score in District history. The solution we’ve proposed is simple math. • Since 2009, CPS students have accounted for nearly 20 percent of the state’s enrollment. • Chicago taxpayers also contribute 20 percent of state income tax revenues, which are the primary funding source for public education; thus, CPS should receive a minimum of 20 percent of total education funding from the state. • This would generate close to $500 million in additional annual revenue. • Today, we receive just 15 percent of state education funding, and are burdened by pension obligations that affect only our District, as the state covers the full cost of teacher pensions outside of the City of Chicago. Under our 20 for 20 approach, CPS would receive an additional $450 to $500 million this fiscal year alone, all but eliminating the budget hole that is threatening to derail our current school year. We believe this is a fair and sustainable solution to our funding crisis and hope that Springfield will work with us to make its implementation a priority. Only then will we be able to put CPS on firm financial footing and turn our full focus toward preparing children for success in college, career and life. The uncertainty facing CPS weighs heavily on our teachers, our school leaders, our families, and especially our students. But it does not have to be this way. There are solutions to be found here, and we firmly believe that if everyone is willing to sacrifice something, then no one will be forced to give up everything. We are confident that if educators, taxpayers, and elected officials come together around the best interests of our children, then 2016 can be the start of a dynamic, financially stable era for Chicago Public Schools. Respectfully submitted, Frank M. Clark Forrest Claypool President Chief Executive Officer Chicago Board of Education Chicago Public Schools CHICAGO PUBLIC SCHOOLS Chicago Board of Education 2015 COMPREHENSIVE ANNUAL FINANCIAL REPORT CONTENTS Page I. INTRODUCTORY SECTION Board Officials ................................................................... 1 GFOA Award .................................................................... 2 ASBO Award ..................................................................... 3 Organizational Chart .............................................................. 4 Letter of Transmittal ............................................................... 5 II. FINANCIAL SECTION Independent Auditor’s Report ..................................................... 10 Management’s Discussion and Analysis ........................................... 14 Basic Financial Statements Statement of Net Position ........................................................ 30 Statement of Activities ........................................................... 31 Balance Sheet — Governmental Funds ............................................. 32 Reconciliation of the Balance Sheet — Governmental Funds to the Statement of Net Position ..................................................................... 33 Statement of Revenues, Expenditures and Net Changes in Fund Balances — Governmental Funds ....................................................................... 34 Reconciliation of the Statement of Revenues, Expenditures and Net Changes in Fund Balances — Governmental Funds to the Statement of Activities ....................... 35 Statement of Revenues, Expenditures by Object, Other Financing Sources and Net Changes in Fund Balance — Final Appropriations vs. Actual — General Operating Fund ........... 36 Notes to Basic Financial Statements ................................................ 37 Required Supplementary Information Schedule of CPS’ Proportionate Share of Net Pension Liability .......................... 82 Schedule of CPS’ Contributions to Defined Benefit Pension Plans ....................... 83 Schedule of Funding Progress — Other Post-employment Benefits ...................... 84 Individual Fund Schedules General Operating Fund Schedule of Revenues, Expenditures and Net Changes in Fund Balance — Final Appropriations and Actual .................................................... 87 Capital Projects Fund Schedule of Revenues, Expenditures, Other Financing Sources and Net Changes in Fund Balances .................................................................. 89 Capital Asset Program Schedule of Revenues and Expenditures and Net Change in Fund Balance — Final Appropriations vs. Actual ................................................... 90 Capital Improvement Program Schedule of Revenues, Expenditures by Object, Other Financing Sources (Uses) and Net Change in Fund Balance — Final Appropriations vs. Actual ................... 91 Comprehensive Annual Financial Report i Page Debt Service Fund Schedule of Revenues, Expenditures, Other Financing Sources (Uses) and Net Changes in Fund Balances ............................................................. 93 Bond Redemption and Interest Program Schedule of Revenues, Expenditures by Object, Other Financing Sources (Uses) and Net Changes in Fund Balance — Final Appropriations vs. Actual .................. 94 Public Building Commission Leases Program Schedule of Revenues, Expenditures by Object, Other Financing Sources (Uses) and Net Changes in Fund Balance — Final Appropriations vs. Actual .................. 95 III. STATISTICAL SECTION (Unaudited) Financial Trends Components of Net Position — Last Ten Fiscal Years ................................. 98 Changes in Net Position — Last Ten Fiscal Years .................................... 100 Components of Fund Balance — Last Ten Fiscal Years ................................ 102 Changes in Fund Balances of Governmental Funds — Last Ten Fiscal Years .............. 104 Revenues by Source — All Programs — Last Ten Fiscal Years ......................... 106 Expenditures by Function — All Programs — Last Ten Fiscal Years ...................... 108 General Operating Fund — Detailed Schedule of Revenue and Expenditures .............. 110 Other Financing Sources and (Uses) — Last Ten Fiscal Years .......................... 114 Ratio of Debt Service to Non-Capital Expenditures — Last Ten Fiscal Years ............... 116 Revenue Capacity Direct and Overlapping Property Tax Rates — Last Ten Fiscal Years ..................... 118 Property Tax Levies and Collections — Last Ten Fiscal Years .......................... 120 Assessed Value and Estimated Value of Taxable Property — Last Ten Fiscal Years ........ 122 Principal Property Tax Payers, Based on Equalized Assessed Valuation — Last Ten Fiscal Years ....................................................................... 124 Schedule of Replacement Tax Data — Last Ten Fiscal Years ........................... 126 City of Chicago Tax Increment Financing (TIF) Districts ................................ 128 Schedule of New Property EAV as a Percentage of Overall EAV ........................ 133 Tax Increment Financing (TIF) Agreements in Support of Chicago Public Schools .......... 134 Debt Capacity Bond Issues Outstanding ......................................................... 138 Total Authorized Bond Issuances .................................................. 141 Outstanding Debt Per Capita — Last Ten Fiscal Years ................................. 146 Legal Debt Margin Information — Last Ten Fiscal Years ............................... 148 Direct and Overlapping Governmental Activities Debt .................................. 150 CPS’ Debt Rating History ........................................................