The Chicago Public Schools budget hangs in the balance as the Trump administration's Department of Education goes after diversity, equity and inclusion programming.
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The DOE is now tying federal funding to compliance by school districts with the administration's views on DEI programs, which are characterized by their defenders as promoting fair treatment and opportunity for all people, particularly groups historically underrepresented or subject to discrimination. The Trump doctrine is that such programs "discriminate against one group of Americans to favor another based on identity characteristics in clear violation of Title VI," according to a statement from Acting Assistant Secretary for Civil Rights Craig Trainor.
On April 3, the DOE wrote to state commissioners of K-12 education, telling them to certify compliance in order to keep receiving federal funds. That followed a Feb. 14 Dear Colleague letter from the Office for Civil Rights, which required educational institutions to "cease using race preferences and stereotypes" across the board, the DOE
Illinois State Superintendent Dr. Tony Sanders responded in
"We are concerned that USDOE seemingly seeks to change the terms and conditions of the Illinois State Board of Education's award without formal administrative process," he wrote.
He asked the DOE to provide the legal authority permitting the department to require him to seek individual certifications from each of the boards of education in the state.
Chicago is waiting to see how the DOE responds to Sanders' letter. But Mayor Brandon Johnson's office said in a statement that a lawsuit is on the table.
If the Trump administration attempts to use unconstitutional means to withhold funds that have already been appropriated, "the Johnson administration would pursue all possible recourse, including legal action," a spokesperson said.
"In the short term, it's a cash flow issue," said Howard Cure, director of municipal bond research at Evercore Wealth Management. "Assuming they won the lawsuit, and I don't know what the odds of that are, they're going to have to try to make up the difference in the short term. … They're going to have a big accounts receivable, but they still have to function."
Many of the district's bonds carry speculative grade ratings.
Rating agency analysts said the district needs to show it has a plan to manage future budget gaps, especially now.
"Any loss of funding, federal or otherwise, will only exacerbate CPS' existing budgetary gap and, specifically, the resources available for educational services for at-risk students that federal grants largely support," said Michael Rinaldi, head of U.S. local government ratings and senior director at Fitch Ratings, which assigns CPS its BB-plus issuer default rating and unlimited tax general obligation bond rating. The outlook is stable
"The inability of CPS to manage future budget deficits and spending pressures, including incremental costs associated with the recently ratified contract with the [Chicago Teachers Union], could result in negative rating action," he added.
Rinaldi said the recently-ratified contract between the district and the CTU provides cost certainty, but serious questions remain about how CPS will pay for the contract's estimated $1.5 billion price tag over the next four years.
Linda Vanderperre, managing director in KBRA's public finance ratings group, said CPS faces mounting fiscal challenges, which led KBRA in October to lower its outlook to negative on CPS' outstanding BBB and BBB-plus general obligation ratings.
"These factors did not solely emanate from the then-unresolved teachers' contract," she said. "When the board formulates a plan to address the totality of its fiscal challenges, KBRA will evaluate that plan and the associated timing and take any appropriate rating action if necessary."
The mayor said in an April 3 statement that the Trump administration is waging a war on public education.
"The administration specifically threatened to defund our Title I schools, which are our high-poverty schools that serve our children with the highest needs," Johnson said. "Last year, federal funding made up about 16% of the Chicago Public Schools' operating budget. … Now is the time for our federal government to increase investment for our local school districts, not to defund and privatize our public schools."
The Department of Education did not respond to requests for comment.
"The budget for the school district is very tight to begin with, so any threat to programs that they have, be it helping disadvantaged children, of which Chicago has many, or school lunch programs, special needs issues — if that is allowed to be taken away, the school district has some tough decisions to make," said Cure. "Are they going to start funding them with their own funds?"
Kenneth Saltman, professor of educational policy studies at the University of Illinois-Chicago, said most of the roughly $2.1 billion in federal funding for Chicago Public Schools goes to Title I.
"There is little doubt that any efforts of the executive branch to cut this congressional funding will be met with a vigorous legal challenge," he said. "Should this get hung up in the courts for a long time, the district will likely need to borrow to cover expenses or see the state or city step in."
In districts with higher numbers of working-class and poor students, federal funding tends to comprise a bigger share of the pie, he said.
Chicago has options — like redirecting tax increment financing money back to schools — but the city has its own financial challenges.
Efforts to cut Title I funds and dismantle the DOE "create the conditions for the privatization of public schools by shifting educational funding to states with expected incentives for states to expand voucher schemes," Saltman said.
He noted that research has found vouchers worsen educational inequality and racial segregation and erode the
"Unfortunately, I expect to see a voucher [and] privatization push from this administration," he added. "Chicago has been recovering from [an] early and aggressive embrace of educational privatization — largely charter-based — implemented from around 2000 until the election of Mayor Johnson."
Frederick Hess, senior fellow and director of education policy studies at the libertarian-leaning American Enterprise Institute, said the issue is less about state versus federal control and more about reducing red tape.
"The feds are obliged to safeguard civil rights," he said. "That means, I think, not permitting race-based caricatures, trainings and affinity groups. But there are certainly significant concerns when efforts to police DEI extend to curriculum and instruction, as what happens in classrooms is outside [DOE's] purview."
Regarding Sanders' claim that the new policy represents a reversal, Hess said the current administration "certainly" has a coherent education policy in some respects, but "there are indeed some tensions."
He noted the importance of downsizing federal spending, including education spending, given the $1.8 trillion federal deficit.
"Obviously, these kinds of piecemeal cuts don't really address that larger issue," he said. "Serious deficit reduction requires tackling entitlements, so it's hard to make the case for these cuts in budgetary terms absent larger fiscal discipline."
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Cure noted the Trump administration has shown it's willing to make cuts and then wait to see how things play out in court.
"This is becoming so political," he said. "Putting aside the needs of the kids, does the mayor want to make a political statement? How much does he want to confront the federal government on this?"
DEI programs are often protected by the free speech clause of the First Amendment, said Margo Schlanger, University of Michigan Law School professor and director of the Civil Rights Litigation Clearinghouse.
She said that while it's possible organizations could hide discrimination behind the label "DEI," for the most part, the DOE's interpretation of Title VI and its characterization of DEI as consistently discriminatory are both wrong.
"Title VI itself was passed because of Congress's concern about the ways members of minority races — and particularly African Americans — were being excluded from the benefits of federal programs," she said. "So was the Constitution's own Equal Protection Clause. Trying to avoid the entrenchment of inequality and exclusion should be a key commitment of governments, to make sure they serve all rather than some of the people."
Schlanger said the federal government can make state agencies implement antidiscrimination programs if they get federal funding.
"But that's for actual discrimination — and caring about diversity, equity and inclusion is far from discriminatory," she said. "Even Chief Justice Roberts… has said that diversity-related interests are 'worthy' and 'commendable.'"
Cure noted that the city itself also faces threats over its sanctuary city status.
"This is not a one-time issue," Cure said of the White House's efforts to impose its ideological priorities through the power of the purse. "This could be a recurring issue."
Both
S&P rates the board a speculative-grade rating of BB-plus with a stable outlook. Moody's assigns the board a rating of Ba1, one notch below investment grade.
CPS referred questions to the Illinois State Board of Education and the mayor's office. The state board declined to comment on next steps if the DOE does not back down, and deferred to CPS on the likely impact of the DOE's new policy.
