The 7-0 vote means residents with a $250,000 home would pay about $84 more each year.
The property tax hike will help close a budget gap of more than $700 million.
The budget approved late Wednesday afternoon includes the largest allowable property tax increase and cuts to staff and programs. It is a new administration's attempt to deal with a budget deficit they inherited and a budget gap that's expected to grow.
"While we had only a few weeks to build this budget, we made sure this was just not a cutting exercise but one of investing in the right place to create what we know our families are actually asking us to do for them," said Jean Claude Brizard, CPS CEO.
The new administration inherited a $712 million deficit for the fiscal year 2012. To close the gap, cuts include:
Several speakers voiced concern about the proposal.
"There's no work toward increasing revenue because thats what its gonna take not just taking things away from people that are working in the system," said Karen Lewis, Chicago Teachers Union president.
"As a retired teacher and a homeowner in Chicago, I am concerned about the property owners tax increase. I will be very honest," said Geraldine Baginski.
"I don't want my children in one classroom dirty. I want my children in safety place. So please think more about the children and forget about the money," said Milagros Roman.
The budget does not cut teachers or funding directly in the classrooms.
Administrators say the increased property tax and cuts elsewhere allow the district to invest in education.
"The people who actually make the schools run, we're actually spending money year over year in a year when revenues are down by a quarter of a million dollars," said CPS chief administrative officer Tim Cawley, who laid out the budget.
Parents, clergy push for longer school day
As the board discussed a plan to lengthen the school day and extend the school year, a group of parents and clergy rallied outside of CPS headquarters Wednesday, calling for a longer school day for Chicago's students. They will likely get their wish. The question is when.
"Our children do not get what they need as far as education," said one parent.
The possibility of lengthening the school year comes as a result of a major education reform package that was signed into law a couple of months ago. It gives individual school districts the option of unilaterally lengthening the day or year without having to negotiate with teachers unions.
Brizard made it known Tuesday that he wants to add 90 minutes to the school year in all CPS elementary and high schools starting in September 2012. But at Wednesday's board meeting he said he would be willing to launch the longer days on September 6.
"We made a proposal to the CTU to look at ways to increase the elementary school day beginning this year, because we know that every day we wait, our kids are losing," he said.
The proposal gives the Chicago Teacher's Union a 2 percent pay raise if they agree to the longer day. But it's not that simple. There are a lot of factors that go into adding time to the school day.
After speaking at the board meeting, Lewis all but dismissed the offer.
"I'm not bargaining anything right now. We're not having that discussion," said Lewis. "I haven't seen any plans. Teachers plan. We don't just jump into things."
Brizard named a committee of school reformers, parents, clergy, community groups and politicians to study how other school districts have elongated their years. They are aiming at the 2012/2013 school year to start the longer days.
"You can't just tack on 90 minutes and say that's it. One of the tasks is to visit schools that have already done this, see how they are functioning and how they are able to do it. Have that discussion about how to replicate that," said Guillermo Gomez, Healthy Schools Campaign.
"The most important thing that the city of Chicago can do in terms of improving the quality of teaching and learning in schools is to lengthen the amount of time that kids have to learn," said Timothy Knowles, Urban Education Institute.
How CPS will afford to pay for the longer days remains unclear.